AN APPRAISAL IS AN OPINION OF FAIR MARKET VALUE
Before the selection of your Appraiser, it is important to understand that anyone can set himself or herself out as a Dental Practice Appraiser. Any qualifications and professional designations acquired are entirely VOLUNTARY.
A license or approval from any licensing body is not required to make the claim that you are qualified to appraise a dental practice.
While a license is to act as a Broker is required in some states (but not Ohio, Pennsylvania, or Kentucky), this license does not necessarily mean that the individual is qualified to appraise. Please be advised that many individuals and companies claim to be appraisers. While this is legal, be certain to ascertain the individual’s credentials and experience first.
The value and worth of an Appraisal or Valuation is directly related to the Appraiser’s qualifications, thoroughness and accuracy of their work.
The key to an opinion of fair market value should be based upon knowledge of actual historical arms length sales for comparative analysis and the supportive rationale.
QUALIFICATIONS OF PRACTICE IMPACT APPRAISERS
- Education: Accreditation or Diploma in Business Administration or Accounting
- No conflict of interest. Highly professional and ethical standards.
- Member of the Practice Valuation Study Group (PVSG);
- Possess historical records of practice sales and market comparisons;
- Credibility as expert witness for court and legal disputes on values;
- Experience with proven record within the appraisal field for professional practices;
- Work devoted to the appraisal and valuation field.
PURPOSE OF AN APPRAISAL
- To determine fair market value and to assist in determining an asking price, if required.
- To provide qualified parties with the required financial and necessary legal information.
- To obtain an accountant’s opinion.
- To assist in obtaining bank financing – loans or leases.
- To determine tax allocations and classifications of assets.
- To prepare legal documents, offers, conditions, bill of sale, etc.
- To permit registration and documentation of instruments for collateral for loans, leases and mortgages.
- To assist the courts in legal disputes for awarding values.
CONTENTS OF AN APPRAISAL
- Complete detailed description of the practice, type of treatment, patients, fees, systems and personnel.
- Location of facility, plans, premise lease, options, renewals, restrictions and area demographics.
- Practice and management company financial statements, expenses, analysis and cash flow.
- Record of all assets, leasehold improvements, clinical equipment and administrative furniture, instruments and materials, liabilities and accounts receivables.
- Details of all major assets, including approximate age, condition, manufacturer, model and serial number with market and replacement costs.
- Goodwill calculations and market comparisons with supporting rationale.
BENEFITS OF AN APPRAISAL
Many hours are required to identify, document and value the various goodwill factors and to accurately record the details of all major assets.
The Appraisal of a professional practice is an extremely intricate process requiring specialized training and specific experience. Without this skill and knowledge, it would be very frustrating exercise, not to mention the likelihood of an inappropriate result.
Appraisal fees are 100% tax deductible; therefore, if you estimated your loss of income due to hours spent by yourself trying to obtain information and compared this to the after tax costs of having an Appraiser provide the report, you are much further ahead to engage a Professional Appraiser.
The Appraisal document is the foundation of factual presentation for numerous financial and legal issues. The Appraiser’s professional accreditations and standards, with absolutely no conflict of interest, will assure the client of quality work and complete confidentiality.