Could I Benefit from an Appraisal Review?
- August 6, 2019
The increased transaction volume in the healthcare industry is driving more and more firms to provide business valuation opinions within the healthcare space. In connection with the greater number of appraisers focusing on healthcare business valuation, Coker Group is experiencing an increase in the demand for appraisal review assignments. The Uniform Standards of Appraisal Practice (USPAP), the generally recognized ethical and performance standards for the appraisal profession in the United States, defines appraisal review as “the act or process of developing an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal review assignment.” An appraisal review can focus on the entire appraisal report or specific components of the appraisal report.
The need for appraisal review services can be brought on by a multitude of factors. Often, Coker is engaged by a client to perform an appraisal review of an appraisal completed on behalf of a target entity where the professional who prepared the underlying document lacked the appropriate credentials. In these instances, due to the lack of a recognized credential, the work product was not prepared in accordance with the high valuation standards that would be followed by a credentialed appraiser — it is not USPAP compliant. This factor on its own can leave the underlying appraisal with little weight if challenged. The strength of the appraisal can be reinforced, if warranted, with recommended revisions made to the underlying appraisal. Some instances may call for a new appraisal, however.
An appraisal review can also be requested if a client believes an appraisal has been delivered that includes methodology errors, demonstrates a lack of understanding of the complex healthcare industry, or includes erroneous assumptions. If found to be true, the underlying appraisal could have resulted in a value that is misleading and/or not at fair market value. Depending on the extent of issues uncovered, the underlying appraisal could possibly be updated. However, in the worst-case scenario, a new appraisal may be needed.
With the increased focus on healthcare transactions, both from valuation professionals who have historically not focused on the industry and from a compliance standpoint, the need for appraisal reviews has increased and will likely continue for years to come. Appraisal reviews can help assure that an appraisal meets the industry’s high standards and can serve as a critical tool to facilitate further dialogue between parties of a contemplated transaction. Contact Coker Group today to arrange an appraisal review for your organization.
DAVID WALLINE, ASA