Kloster Commercial Resources - Appraisal Definitions

Appraisal Definitions

FAIR MARKET VALUE-IN-USE
An opinion of the gross dollar amount to be realized between a willing buyer and a willing seller, in the open market, assuming that neither party is under compulsion to buy or sell, both fully aware of all relevant facts. Those specific assets including installation, foundations, electrical and mechanical connections, etc. along with the contribution of the assets to an operating facility. The appraised value presupposes the continued utilization of the asset(s) in conjunction with all other installed assets, and all at the current location, but without consideration of the financial justification of the investment in the asset(s). A final factor to be considered for "in-use" value is the availability of the real estate in which the assets are installed. A qualified buyer must be afforded the opportunity to buy or lease the facility at market rate. Should this not be possible, it may preclude consideration of an "in-use" value.

TYPICAL USES
May be appropriate for buy-sell agreements, ESOP's, contemplated sale of assets or in conjunction with a business appraisal.

FAIR MARKET VALUE
An opinion of the gross dollar amount to be realized between a willing buyer and a willing seller, in the open market, assuming that neither party is under compulsion to buy or sell, both fully aware of all relevant facts, and both seeking to maximize economic self interest.

TYPICAL USES
Common applications include marital dissolutions, contemplated sale of assets, financing and lending matters, general business management issues.

ORDERLY LIQUIDATION VALUE
An opinion of the estimated gross dollars (before any sale expenses) which the assets could realize if sold by negotiated price (private treaty) sale at a properly advertised and professionally managed liquidation sale, by a seller obligated to sell, over an extended period of time, usually 3 to 6 months. All assets are to be sold on a piecemeal basis, "as is, where is" with purchaser responsible for removal at their own cost and risk. Any deletions to the total package could change the psychology or appeal necessary to attract the proper number of, or financial capacity of buyers in an orderly liquidation sale, adversely affecting indicated value.

TYPICAL USES
General application relating to business financing and loan collateral support

FORCED LIQUIDATION VALUE
An opinion of the estimated gross dollars (before any sale expenses) expected from a properly advertised and conducted public auction or liquidation sale, held under forced conditions and under present day economic trends. Taken into consideration are the physical location of the assets, difficulty of removal, condition, and overall appearance of the assets. A further consideration is the ability of the assets to draw sufficient prospective buyers to insure competitive bidding. All assets are sold "as is, where is" with purchasers responsible for removal at their own cost and risk. Any deletions to the total package could change the psychology or appeal necessary to attract the proper number of, or financial capacity of buyers in a forced liquidation sale, adversely affecting indicated value.

TYPCIAL USES
Business loan collateral support, discontinuation of operation decisions. May be appropriate for problem loan analysis, liquidation planning and related credit purposes.