Comparing a Bed and Breakfast Valuation
to an Appraisal
by Claude Gagne
When we go on a listing appointment, Innkeepers ask us for our opinion on the value of their Bed & Breakfast or Inn property, and each time, this is a tough question to answer. We are not appraisers, yet we are in contact with, and usually have very complete financial information of, a great number of such properties that are both on the market or which have sold. We are also in contact with financial institutions and have knowledge of their parameters and what they look for in granting loans to Innkeepers.
The value we give to a property is based on market conditions, pure and simple. It does not take the place of an appraisal, which we recommend as the only way of establishing the true value of a property. An MAI appraisal for an Inn is expensive, ranging from $3500 on up depending on the complexity of the property.
Naturally, Innkeepers are reluctant to spend such a large sum at sale time, but clearly it would be in their best interest. Normally, Banks require such an appraisal as a condition to granting a loan. So at sale time it is a required necessity. Why not get the appraisal to establish the price of your property, and ask that the appraiser also certify the appraisal to a Buyer's bank within say, eighteen months, and include the appraisal in the price of the property or bump up the price of the property to include a part of, or all of, the appraisal cost.
Remember that hardly anyone pays more than the value shown on an MAI appraisal for a property, but many times there is a vast difference between what the buyer paid and what the appraisal indicates. Clearly it is in the interest of the Innkeeper to obtain the appraisal and top dollar for his property.
We've met Innkeepers that bring out a Property Valuation that they feel justifies a high price for their Inn. These Valuations are done by noted Inn-Consultants and cost the Innkeepers as much a $10,000. The TRUE purpose for these Valuations is to massage and make the Innkeepers feel good as the Valuation overstates the true value of the properties by several tens of thousands of dollars. They also have the effect of relieving the Innkeepers of their hard earned money.
If you have any doubt as to the worth of these Inn-Consultant Valuations, call your bank and ask them if these Inn-Consultant's credentials are acceptable to them. These Valuations many times rely on future projections, while appraisers and Banks look at past performance as the real key to value. These Valuations are not worth the paper they are written on.
MAI appraisers must have demonstrated their appraisal experience. Each appraiser meets stringent requirements and once designated, must participate in a program of continuing education. Training in up-to-date valuation techniques, coupled with experience and integrity, make Appraisal Institute members the preferred source for Banks and financial institutions.
Our advice: Don't get caught with a high priced Valuation that benefits no one except the person that sold it to you!
The B&B and Country Inn Marketplace