Closing Time
Appraisers are in the business of providing financial due diligence. We are often required to pass judgment on a deal that’s been closed, or is due to close soon.
Most people have interacted with residential home appraisers. You are exciting to have a purchase offer accepted on your dream home with both the buyer and seller happy on the price – but then some guy in khakis holding an iPad strolls in and gets to determine whether you actually buy the home or not.
Because of this, some clients see appraisals as barriers to overcome on the way to closing a deal.
However, the pairing of a good appraiser and a wise client can help you close deals more quickly while mitigating risk for all parties.
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Machinery and equipment (M&E) appraisers, like all professional vendors, want to make our clients happy. We want to help you close deals quickly while providing due diligence and reality checks so that you make wise financial decisions.
If you are a lender, broker, buyer or seller involved in a small to midsize business (SMB) transaction, here are some tips for improving the equipment appraisal experience:
1. Don’t be coy. The appraiser handles confidential information every day and will be happy to sign a nondisclosure agreement (NDA). The appraiser has seen every type of business in every type of situation – we do not care whether you are winning or losing, rich or poor, buying your dream or losing grandpa’s dream.
Tell the appraiser exactly what is happening and why you need the appraisal. We are going to piece the situation together ourselves eventually – but if you want to avoid surprises, it’s best to share everything up front.
The more information you hold back, the less assurance we can give you on the fee and time required to complete the assignment.
2. Get organized. If you were buying a package of equipment, you would want to know some things: How old is it? How much did it cost? Do you have an inventory? Do you have maintenance information? Where and when can I see it operating?
Appraisers need to know the same things. Get the company’s depreciation schedule / tax asset detail, which shows the history of purchases. Hunt down any internal asset schedules (such as insurance or asset management lists). Ask the maintenance department for records on the main items. Find out where everything is located, and when it can be inspected.
If you are organized, we are going to be inclined to bump your project to the front of the queue. We can also be more competitive on pricing, because many of our risks will be mitigated – for example, we will know whether we have to travel further to see key items, or whether we have updated mileage information.
3. Be available! Equipment is not like real estate: the key details about your machinery are not found on the county tax website. We are going to have questions throughout the assignment, and the sooner you give those questions your attention, the faster the appraisal will be done.
We often book appraisals which are indicated to be urgent, but the key person (such as a COO or CFO) is not willing to give time or attention to our inquiries. We are left waiting and explaining to our client why the deal timeline had to be pushed.
Assigning a dedicated contact person for appraisers – one who understands the urgency of giving attention to the required due diligence inquiries – is necessary for completing a timely transaction.
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Many of our clients, especially those in commission roles such as commercial lenders and business brokers, want to “Always Be Closing.” (It’s not unusual to hear clients quote Glengarry Glen Ross as their self-motivation mantra!)
These clients can develop the cynical perspective that each due diligence step is a charging linebacker, needing to be juked and spun around and stiff-armed. Unfortunately, this results in deals getting delayed, while adding unnecessary fees and drama to a transaction.
The reality is that due diligence vendors such as appraisers are only a hinderance to closing if the client doesn’t understand their role and doesn’t want to assist them.
When our clients appreciate the risk mitigation we bring to a transaction, and are prepared with the information we are going to require, they reap the benefits:
They close deals faster.
Their appraisal fees are lower.
They transact smarter.
If you’re preparing for a transaction and want to make sure your appraisal process is smooth, efficient, and cost-effective, call Capitale Analytics or request a quote here.