The purpose of the appraisal, along with the type of value definition, determines the criteria the appraiser considers in developing the valuation opinion. Since clients often have questions about the value of assets under various circumstances and conditions we have compiled a list of the most common value definitions.

Fair Market value in Continued Use

“Fair market value in continued use is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date and assuming that the business earnings support the value reported. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs to make the property fully operational.”

Comments:

Fair market value in continued use is the most encompassing value definition because assets are valued to include installation and assemblage costs and the costs to make the asset fully operational. The definition is similar to Fair Market Value Installed with and the exception of the assumption that the business earnings can support the equipment value.

Fair market value in continued use is the most commonly used value definition where liquidation circumstances are not required or anticipated and is typically used in business valuation, divorce settlements, retirement planning, litigation support and income tax reporting.

Orderly Liquidation Value

“Orderly liquidation value is the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

Comments:

The orderly liquidation value is the value received when the assets are sold piecemeal over a predetermined period of time (often three to six months). It is assumed the assets are properly advertised and that the buyer is responsible for all removal costs. The assets are sold without warranties or representation as to condition. If a buyer and seller cannot negotiate an acceptable price during the time period specified, the final option would be to offer the assets at a public auction.

Forced Liquidation Value

“Forced liquidation value is the estimated gross amount, expressed in terms of money, that could typically be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.”

Comments:

Often times referred to as “Quick Sale”, forced liquidation value is the value received when assets are sold piecemeal at public auction. The buyer is responsible for the costs of removing the equipment and the seller makes no warranty or representation as to the condition of the assets. It is assumed the assets are properly advertised in a manner that is commercially practical and economically reasonable.