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» Quick-Sale Values of Commercial Real Estate
The quick sale value of a property is the amount it can be sold for if the seller must recoup their investment (money) in a property quickly. Different than an appraisal value, the quick-sale value will take into consideration the likely number of buyers for such a property, the potential uses for it, the value of the business on an annual basis if the property is business-specific, such as a hotel.
For a hotel, for example, take the net income per year and compare it to the reasonable expectation for return on investment by a buyer. If the buyer will run the property on a daily basis, the buyer will want to see a 12 - 13% ROI.
If the buyer can purchase a building and simply rent it out to stable tenants over a very long period of time, the personal time expense requirement is much less. In that event, the buyer may look at a 7-10% ROI as reasonable.
Appraisals are necessary to obtain a hard money loan, but they are not the appraised value hard money lenders will use as the basis for the loan. Now you know why.
