Q: Would the appraiser for a LLC, that holds only rental real estate, use a real estate appraiser or a business valuation appraiser to value the business?

Answer:

Most real estate appraisers shy away from valuing equity interests such as LLC minority interests.

In most cases, if the valuation is other than a pro rata share of the net asset value (per the agreement), a real estate appraiser would provide an appraisal of the underlying rental property (in your example).

The business appraiser would then consider that appraised value in his or her determination of value of the entity or of the interest in the entity.

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For more information on this topic and other topics related to buy-sell agreements, check out Buy-Sell Agreements for Closely Held and Family Business Owners.

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This series, “Ask Chris Mercer,” is derived from the Q&A session of the May 16, 2012 webinar, “Buy-Sell Agreements” sponsored by WealthCounsel and attended by over 600.  

If you have a question for Chris, feel free to email him directly here.