Last week, the American Society of Appraisers joined forces with the Royal Institution of Chartered Surveyors (Americas) to express their “strong opposition” to SOP 50 10 5(D), a proposal by the Small Business Administration that would permit real estate appraisers to perform business valuations for special use properties after successfully completing a single course (“Fundamentals of Separating Real and Personal Property From Intangible Business Assets”) offered by the Appraisal Institute.
In a letter signed by Jay Fishman, chair of the ASA’s government relations committee, and Bruce Bingham, chair of RICS Americas valuation council, the two organizations told the SBA’s deputy assistant administrator, James Hammersley, that the AI course teaches a “fundamentally flawed” approach to valuation. Moreover, they point to provisions of the SOP that direct appraisers not only to categorize a firm’s assets, but also to separately value the property in each category:
The essential problem with such requirements is that there are very few, if any, appraisers who hold valuation credentials in multiple property categories (e.g., real estate; intangibles; machinery and equipment; business enterprises) and who are competent, therefore, to value more than one category of property. We fully understand that the going value of many businesses, small and large, includes their ownership of property in multiple asset categories. But, the valuation of such firms requires a team of appraisers representing the appropriate disciplines; and we believe the SOP should require that approach.
The two organizations “pledge to work with the SBA” as well as members of the various appraisal communities to revise and/or strengthen the SOP, but in the meantime, they urge the SBA to immediately suspend its operation until it can establish proper educational and testing requirements for real estate appraisers to value business interests. Read the ASA/RICS complete letter, its six points of opposition and recommendations, here.
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