Appraising the Choice of Appraiser

Business and real estate appraisals determine the damages awarded in larger commercial cases. Therefore, the credibility and quality of the appraisal report are paramount. Nonetheless, parties often choose their appraiser because they want the appraiser to provide a valuation that is higher or lower depending on the party’s preferred outcome. This can be a short-sighted decision at times.

Courts strongly prefer appraisers to have the maximum amount of knowledge:

  • In YAM Capital III, LLC v. Bailey, the court needed an appraisal of a hotel. The Plaintiff hired a licensed real estate appraiser who the Court deemed more credible than a general business appraiser who had never “done a real estate appraisal” and was never qualified to testify in court about real estate appraisals.

That being said, the Arizona Court of Appeals did not provide any information as to whether the real estate appraiser had any specific experience valuing hotels or hospitality properties. One would think hiring an appraiser with specific experience appraising hotels would have been the optimal choice in this case.

  • In Matter of Gallasso v. Cobbleskill Stone Products Inc., the Court needed to determine the valuation of a quarry using mineral reserve estimates. In reaching its conclusion, the Court expressed its preference for the appraiser who had in-depth knowledge of local and regional conditions and “deep familiarity” with the subject matter.

It is also important to note that the New York Supreme Court favored the appraisal “using a relatively straightforward approach” versus the appraisal it considered “overly complex, difficult to understand and cumbersome.”  The disfavored appraisal relied on a rather wide range of variables and assumptions that made a valuation more susceptible to miscalculation.

  • In Vacheresse v. Paulchel, the Ohio Court of Appeals reached an easy decision when it chose a professional appraisal report that was “extensive” and “meticulous” with “extensive supporting materials” versus the value opined upon by one of the parties.

Sometimes offering no appraisal and not losing credibility before the Court is the better option.

Choosing an appraiser is no different than choosing an attorney or doctor—an experienced practitioner with relevant expertise makes the most sense.

David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, real estate, and other issues. He can be reached at david@seidmanlawgroup.com or 312-399-7390.

This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.

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