Differences between Business Appraisers, CPAs, and Due Diligence Experts

October 13, 2011

What are the differences between a business appraiser, CPA auditor, and a due diligence expert?

It has been said that you cannot judge a man until you have walked a mile in his shoes.

Over the years I have trod the business path–for much more than a mile–in the role (if not in the footwear) of business appraiser, CPA and due diligence expert.

And since setting up Due Diligence Assistance for buyers, I have gained a new respect for what knowledgeable CPAs have to go through when assisting their buyer clients in investigating a business. With very limited information they must determine if the books are “cooked” (containing false and incomplete information) and if so, by how much.

The CPA may find him or herself in the most awkward position of being informed–usually by the seller–that the business books are not completely accurate because they understate the company’s earnings–a fabrication intended to reduce the seller’s tax liability. Most accounting professionals who listen to that explanation have to wonder if the seller–who now has admitted to being dishonest–is also attempting to deceive the buyer by claiming the company does more business than is shown in its records.

Meanwhile, the appraiser often is asked to take the information provided by the accounting professional and use it to establish a “fair market value” on which the buyer can rely. The competent appraisal professional will, of course, analyze the macroeconomic factors–including industry trends, status of the economy and competitive environment–plus the capacity of the company (given the condition of its assets, the ability and loyalty of employees, and effectiveness of its marketing programs), to continue functioning in the future as it has in the past.

And what does the appraiser make of the figures furnished by the CPA who is analyzing the company’s books and hearing about some manipulation by the seller?

The appraisal professional will have to issue a report with a disclaimer, stating either that: 1) the value is based on the figures supplied by the accountant–figures that should be verified, if possible, by the buyer; or 2) the value assumes the validity of income information which has been claimed, but has not been documented, by the seller.

This is the puzzle, not yet solved, that often is delivered to the due diligence advisor, along with the request that he, or she provide a solution.

If the CPA is a “numbers scientist” and the appraiser is a “theorist” who understands how to apply principals and formulae to specific situations, the role of the due diligence expert is to be the “professional investigator.” This is the person whose skill is focused on taking all this information, mixing it with his or her detective work, and providing a sensible interpretation of what was learned, so the buyer can make an intelligent decision about whether or not to buy the business, and if so, for how much.

Among the questions to be pondered by the due diligence pro is the validity of the seller’s stated reason for wanting to turn the business over to someone else. In my experience, there often is another reason–one that is not stated. And part of the job of the person conducting due diligence is to try to learn what’s really going on.

Accurate answers to this question can shed a new light on the situation and help a buyer to determine–along with the other information provided by the due diligence advisor–if this really is a business worth buying, and if so, at what price.

NEED AN APPRAISAL?

R. A. DELEON Appraisal & Realty Services (RADARs) is also a full service appraisal company.  We provide appraisals for residential homes, agricultural, commercial & industrial lots and other realties throughout the Cagayan Valley and Northern Luzon areas.

 

A name you can trust.  If you are looking for a credible business partner to work with, look no further. RADARS has established its credibility in this industry and achieved mutual respect with our peers through honesty and a commitment to excellence in service.

Good business relationships are based on trust.  RADARS’ commitment to honesty and open communication is the foundation from which a solid business relationship is built. We pledge to always be honest with you and protect your best interests to the fullest extent of our ability.

Full time and pioneering appraiser in Cagayan Valley:  
• Certified Property Valuer / Realty  Appraiser
• Reliable and professional
• Committed to excellence
• Uses technologically advanced methods
• Results driven
• Will go the extra mile
• Dedicated to excellence in customer service

Member
• Philippine Association of Realty Appraisers (PARA)
• PAREB-Santiago City Realtors Board, Inc.

With over 20 years of experience, you can count on R. A. DELEON Appraisal & Realty Appraisal Services (RADARS) for your entire appraisal and realty brokerage services needs.

For iquiries, you may call me at:

Mobile Number - +63917-574-2390;  Telephone Number - (078)-682-5419,

or Email me at radarsinc@yahoo.com

ENGR. REYNALDO A. DE LEON

 

APPRAISAL SERVICES

APPRAISALS

We are Certified Property Valuers and Appraisers. We perform appraisals for a number of different needs and disciplines. Each appraisal conforms to the Philippine Valuation Standards (PVS) . It is a full written report including digital print photos.

APPRAISALS FOR INSURANCE COVERAGE

Insurance Coverage Appraisals are necessary in the use in determining the level of insurance protection in your policy for your personal property.

By having sufficient insurance coverage, you are allowing yourself peace of mind in case of damage or theft. Should anything happen to your treasured items, an accurate appraisal may be one of your most sound and inexpensive investments.

Insuring your personal property can protect your best interest when moving, upgrading your insurance policy, or establishing a new policy. Upgrading your appraisal every 3 to 5 years is recommended to have the current valuation available to maintain the most effective coverage possible.

                APPRAISALS FOR SETTLING INSURANCE CLAIMS

Insurance Claim Appraisals are used in determining the replacement value of damaged or stolen items that are involved in an insurance settlement claim. We work with individual clients or directly with the insurance companies with the claims. This type of appraisal is essential to recovering the proper compensation for the damaged or stolen items. Unfortunately, some items are damaged beyond repair or the restoration exceeds the value of the items. We advise on whether restoration is plausible or recommended for damage claims.

APPRAISALS FOR PROBATE

A probate is the court process in which a deceased person’s estate is administered, whether the person died with or without a will.

The process includes:

• the appointment of an executor or representative of the estate
• notifying the creditors
• inventorying the estate, and
• distributing the estate according to the deceased person’s will or according to law if there is no will

RADARS offers professional appraisal assessments of probate cases. Our expertise include determining the fair market value for estates in probate cases for the express function of determining tax liability.

 

APPRAISALS FOR ESTATE PLANNING PURPOSES

As adults, we understand that we have responsibilities to not only ourselves, but to the people who are important to us. Planning an estate is often overlooked until it is too late. By planning your estate, you are able to be proactive in the decision-making process and it ultimately allows your loved ones peace of mind.

Our experienced appraisers can work directly with you, your insurance agent, attorney or trust officer, to insure the most accurate appraisal for your estate.

APPRAISALS FOR ESTATE SETTLEMENT & EQUITABLE DISTRIBUTION

When going through a settlement of estate of deceased person, you need to have qualified professionals working for you to make this process as simple as possible. You need someone who understands the level of confidentiality that you require not only for legal purposes, but for you own piece of mind as well.

At RADARS, our appraisers are very experienced at working with these cases. We have done work for several law firms, providing appraisal reports for settlement and equitable distribution. When necessary, we also offer expert witness testimony in court.

We can work directly with you or your attorney. If you require an appraisal of the contents of your residence because of estate settlement or any other equitable distribution situation, please contact our office to speak to one of our appraisers for a further discussion about your case.

APPRAISALS FOR CHARITABLE DONATIONS

When making a charitable donation, you must obtain the most accurate appraisal possible. All of the appraisal reports prepared by RADARS  are prepared using the standards set forth by the Philippine Valuation Standards (PVS) and the Uniform Standard’s of Professional Appraisal Practice (USPAP). This accuracy and professionalism is crucial to receive the proper compensation by the government and other taxing authorities.

If you are contemplating a donation and would like an appraisal, please contact our office for further discussion.

REAL ESTATE TRANSACTION DEALS (FEES AND TAXES)

 

STEP 1: CITY/MUNICIPAL ASSESSOR’S OFFICE
SECURE THE FOLLOWING:

1. Certified True Copy of Tax Declaration (House and Lot)
2. Certificate of No Improvement (If vacant lot)
2 Original Copies – 1 for BIR and 1 for Register of Deeds

STEP 2 : CITY/MUNICIPAL TREASURER’S OFFICE
SECURE A TAX CLEARANCE

*In order to secure a Tax Clearance, Real Property Tax must be updated as of date of document of sale.

STEP 3: BUREAU OF INTERNAL REVENUE
PAY THE FOLLOWING:

1. Capital Gains Tax (6% for individual seller or 7.5% for corporation)
2. Documentary Stamps Tax (1.5%)

Note:
*Capital Gains Tax and Documentary Stamps Tax shall be based on Selling Price (per Deed of Sale)
, Market Value of Tax Declaration, or BIR Zonal Value, whichever is higher.

*Form for Capital Gains Tax can be secured from the BIR or can be downloaded from the BIR website http://www.bir.gov.ph

Requirements:

a. Photocopy of Certified True Copy of Transfer Certificate of Title
b. Certified True Copy of Latest Tax Declaration
c. Real Estate Tax Clearance
d. Original and two (2) Photocopies of Deed of
Absolute Sale
e. Certificate of No Improvement from the Assessor’s Office if vacant lot.

Additional Note:

a. Payment for Capital Gains Tax and Documentary Stamps Tax shall be in cash or in managers check, to be paid to the BIR Regional office or BIR-authorized banks where property is located.

b. Capital Gains Tax shall be filed and paid to the BIR within thirty days from date of sale.

c. Documentary Stamps Tax shall be paid on or before the 5th day of succeeding month from the
date of sale.

STEP 4: CITY/MUNICIPAL TREASURER’S OFFICE
Pay the Transfer Tax at the Treasurer’s Office.
Requirements:

a. Photocopy of Deed of Absolute Sale
b. Photocopy Transfer Certificate of Title
c. Photocopy of Tax Declaration
d. Photocopy of Real Estate Tax Clearance

*Transfer Fee is 1/2 of 1% of Selling Price or Market Value of Tax Declaration, whichever is higher

STEP 5: REGISTER OF DEEDS
Submit to the Register of Deeds where property is located the following documents:

a. Owner’s Duplicate Copy of Transfer Certificate of Title
b. Deed of Absolute Sale (3 copies)
c. Certificate Authorizing Registration from
the BIR
d. Transfer Fee Receipt
e. Photocopy of Real Estate Tax Clearance
f. Photocopy of Tax Declaration or if vacant lot, Certificate of No Improvement

A NEW TITLE UNDER THE NEW OWNER’S NAME WILL BE RELEASED BY THE RD

REMINDER: The owner or the broker as authorized by the owner should be the one to present the above documents to the Register of Deeds because the new TCT shall be released only to the presenter of the above documents

STEP 6: CITY/MUNICIPAL ASSESSOR’S OFFICE
Secure from the Assessor’s Office a new Tax Declaration.

Requirements:

a. Photocopy of Transfer Certificate of Title under the new owner’s name, duly authenticated at the Assessor’s Office
b. Photocopy of Deed of Absolute Sale
c. Real Estate Tax Clearance

IMPORTANT:

Always bring Certified True Copies of the documents as well as necessary receipts to avoid inconvenience in case you will be required to present them.

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