Salvage value is the price at which an object can be sold on the market for a limited time. This type of value is always less than the market value.

The condition for the emergence of liquidation value is the presence of emergency circumstances that affect the change in the normal market situation.

One of the most common areas for estimating the liquidation value is the valuation of an enterprise if it needs to go bankrupt.

Factors affecting salvage value

• Exposure time. There is a direct relationship between the cost of liquidation and the sale period - the lower it is, the lower the cost. The duration of the exposure depends on many factors: the type of property, the initial cost of implementation, the level of demand, etc.
• General economic situation in the market.
• The degree of attractiveness of the object for the market. The attractiveness of an object is determined by its individual characteristics and depends on the demand for a particular type of objects.
• subjective factors.

Estimation of the liquidation value is carried out in the following cases:

• if the company is in danger of bankruptcy;
• if the valuation of the business of the enterprise indicates that the value of the company in liquidation will be higher than in the case of continuing the activities of the organization;

Liquidation value estimation methods

1. Direct method. This method involves the use of a comparative approach.

Methods applied:

• comparison of sales - direct comparison with analogues;
• method of correlation and regression analysis - a quantitative method for determining the dependence of the liquidation value of objects on various factors.

2. Indirect method - involves the calculation of the assessment of the cost of liquidation through a market assessment. The salvage value is equal to the market price minus the discount for the forced sale factor.

The main difficulty lies in determining the value of this discount. It depends on many factors:

• attractiveness of the object;
• market situation;
• exposure period;
• other factors.

Due to the lack of the necessary information on the Russian market, the discount for the forced sale factor is calculated by an expert. Statistics show that the size of the discount ranges from 20-50%.

Liquidation value assessment in a crisis

In a normally functioning market, objects are alienated at the market price. In conditions of economic instability, additional factors begin to act on the price, the main of which is the limited implementation period. Therefore, the assessment of liquidation value in a crisis is very relevant.

With a stable market situation, the exposure period is determined on the basis of statistical data. At present, when there is a complex unstable situation in the market, the calculation cannot be carried out on the basis of statistics. Therefore, in a crisis, expert methods prevail in calculations. The accuracy of the salvage value assessment largely depends on the experience and professionalism of the appraisers.

LLC "Aurora Consulting North-West" - an independent assessment of commercial real estate.

When selling real estate in the shortest possible time, many questions arise related to determining its liquidation value. In this article, we will try to figure out how the market value of an apartment differs from the liquidation value, what factors affect the assessment and what package of documents needs to be prepared.

Liquidation value: what is it?

The salvage value of residential property is the price at which it can be sold in the shortest possible time, excluding other costs. In other words, this is the price for which the owner of the apartment will be ready to sell it, provided that it needs to be sold very quickly for some reason. This price is always significantly lower than the market price, usually the difference is about 30 percent.

The assessment is carried out for:

• banking institutions;
• end buyer;
• local authorities.

When obtaining a loan for an apartment, an assessment of the cost of housing is mandatory. This is due to the fact that real estate becomes the property of the bank for the period of loan repayment.

In order to correctly assess the liquidation value and avoid possible errors, it is best for the seller to seek help from independent appraisers or a real estate agency. It is worth giving preference to companies that have proven themselves in the real estate market and have relevant experience. You should also make sure that the appraiser has a license, a certificate to conduct an appraisal operation.

In order to order an assessment, the seller must provide the specialist with a document confirming the ownership of the apartment.

The difference between salvage value and market value

Market value is the likely price for which you can sell an apartment on the real estate market, given its features. This price depends on many factors:

1. Quadratures.
2. The development of the infrastructure of the area in which it is located.
3. Type of apartment building.
4. Communications.
5. Room locations.
6. Remoteness from the city center.

The liquidation value differs in that this is the price with which the seller must be forced to agree if it is necessary to sell the apartment in a short time due to certain circumstances.

The amount of liquidation value is primarily affected by the fact that it needs to be realized as quickly as possible. But the time factor does not play a role in the market value, the quality of residential real estate is assessed first of all.

The main differences between salvage value and market value are:

• the sale of real estate is forced;
• short sale period.

How is salvage value estimated?

There are two most common calculation methods: direct and indirect. Next, we will consider each of them in more detail.

When calculating in a direct way, a comparative analysis is used. That is, recently sold apartments with similar characteristics are analyzed. After conducting a price study, you can derive the optimal cost of the object of interest. The disadvantage of this method is that it cannot be used when evaluating apartments that were designed according to an individual project.

The indirect method is based on market value less liquidation costs associated with the rapid preparation of all necessary documentation and the limited timeframe for the sale of residential real estate.

The main stages of assessing the liquidation value:

1. Agree on an exact date.
2. Determination of the evaluation method.
3. Gathering the necessary information.
4. Coordination of the received information.
5. Preparation of a detailed written report.

Documents required for the examination

In the process of appraisal, a specialist appraiser will need a certain number of documents for calculations and analysis of real estate.

List of main documentation:

• a document confirming ownership (contract of sale for an apartment, gift, etc.);
• extract from the technical passport of the bureau of technical inventory;
• detailed scheme of residential real estate;
• certificates of the presence or absence of debts for the apartment.

Factors affecting the score

The salvage value of an apartment is assessed according to a number of criteria. The main ones are:

1. The general political and economic situation in the country - in times of crisis, the cost of housing falls significantly.
2. General situation in the real estate market.
3. The period during which it is necessary to sell an apartment - the shorter the period of sale, the lower the cost.
4. General quadrature of the dwelling, layout.
5. The condition of the apartment as a whole - the state of decoration, the presence of communications.
6. subjective factors.
7. Location, number of storeys, type of building of an apartment building.

In the Russian real estate market, the market value is mainly used when selling a residential property. The liquidation value is most often used in a crisis in the country and in mortgage lending.

To avoid possible errors in determining the liquidation value, you must first understand what its essence is, how it differs from the market value. You should not do the assessment yourself, it is best to turn to specialists, because only an experienced appraiser will be able to calculate the exact and most reliable cost.

M. Zakharova, O. Yumanova, E. Romanenko; magazine " "

Maria Zakharova,
Leading Specialist of the Evaluation and Analysis Department
Olga Yumanova,
Elena Romanenko,
Evaluation and Analysis Department Specialist
LLC “Business Support Group (GPB)”

1. Economic and legal aspects of salvage value.

Market and other types of value .

Market price - the most probable price at which the given object of appraisal can be alienated on the open market in a competitive environment, when the parties to the transaction act reasonably, having all the necessary information, and any extraordinary circumstances are not reflected in the value of the transaction price, that is, when:

one of the parties to the transaction is not obliged to alienate the object of evaluation, and the other party is not obliged to accept the performance;

the parties to the transaction are well aware of the subject of the transaction and act in their own interests;

the object of assessment is presented on the open market in the form of a public offer;

· the price of the transaction is a reasonable remuneration for the object of evaluation and there was no coercion to make a transaction in relation to the parties to the transaction from either side;

· the payment for the appraisal object is expressed in monetary form .

Obviously, if any of the above factors is violated, other, new types of values ​​arise in place of market value. It is this fact that gives rise to the need for a clear definition in each specific situation of the type of value that is most adequate.

So, for example, if there are specific goals for the acquisition of a particular property, it is necessary to determine not the market value, but the investment value. For example, in a situation of acquiring a stake in a TV company, it is difficult to talk about the typical intentions of the buyer. The objectives of such an acquisition will vary widely, ranging from purely commercial (to generate revenue in the future) to completely non-economic (gaining access to the audience). And in this case it will be fundamentally wrong to proceed from the definition of market value.

The same reasoning is legitimate to apply in case of deviation of other factors from the determination of the market value. The basis for the occurrence of the liquidation value considered in this article is the presence of emergency or conditionally emergency circumstances leading to a violation of market factors. Such circumstances include the factor of limited time of sale and the factor of forced sale.

Typical cases of occurrence of salvage value.

Let's consider typical cases in which these factors are inherent (Figure 1) and dwell in more detail on each of the analyzed situations.

Figure 1: Typical Residual Value Cases

Upon liquidation of an enterprise there is a need to develop a clear schedule for the sale of property and the repayment of the company's debt (moreover, there are often situations when the total amount of income from the sale of property does not cover all debts). At the same time, the terms of exposure (pre-sale activities and the sale itself) are very limited due to the need for a fairly quick release from assets and repayment of debt. It is the question of available time that plays in this case a decisive role in the magnitude of value (ceteris paribus).

In turn, the duration of the time period is determined by the conditions of each specific case of liquidation. At the same time, it must be borne in mind that the very decision to liquidate can be either voluntary (that is, there is a planned action) or forced. As a rule, the first case gives greater variability in decision-making and allows you to develop more effective plans for the liquidation of the enterprise.

Forced liquidation in the process of bankruptcy is carried out when a decision is made to open bankruptcy proceedings based on the results of external management. The resulting bankruptcy estate is subject to sale at open auction. At the same time, the terms for the sale of property are extremely limited.

Thus, it is necessary to distinguish between voluntary and involuntary liquidation.

Realization of collateral objects in the context of this article is rather a hypothetical (disconnected from reality) concept. In this case, the determination of the liquidation value is necessary to justify the lower limit of the loan, which is secured by the pledged property and we are not talking about the actual fact of the sale of the object. However, in order to provide a loan, the lender needs to know at what price it will be possible to sell the collateral in a short time if the loan is not repaid. This value in some sources of literature is called collateral. However, it can be argued that in its economic essence, it is also liquidation, since there are factors of limited time and forced sale.

The accelerated sale of other property due to the limited exposure time also makes it necessary to determine the liquidation value. At the same time, there are also several options for such implementation - either it is an initiative (voluntary) implementation, or forced (under duress), provided for by the current legislation.

So, in the process of enforcement proceedings, the property seized by a court decision is sold, and within a period not exceeding two months from the date of seizure.

Thus, the property is almost always below its market value. And this fact is negative for the seller of property and definitely positive for the buyer.

The final definition of the concept of salvage value.

Thus, having understood the situations that necessitate the calculation of the salvage value, it seems possible to give a final formulation of this concept.

In the current Russian legislation, the concept of salvage value is enshrined only in the valuation standards approved by the Government Decree: “ liquidation value- the cost of the appraisal object in the event that the appraisal object must be alienated within a period less than the usual exposition period for similar objects.

A more detailed and correct definition is contained in the Standards of the Russian Society of Appraisers (ROO): “ salvage value, or forced sale value- the amount of money that can realistically be obtained from the sale of property in a time frame that is too short for adequate marketing in accordance with the definition of market value. In some States, situations of forced sale may include cases with an involuntary seller and buyer, or buyers who are aware of the difficulties experienced by the seller.

In Western literature, two types of liquidation value are distinguished - ordered (orderly liquidation value) and forced (forced sale value). The second corresponds to the Russian definition, the first assumes that the owner has enough time to ensure that the exposition period of the object is optimally close to the market average.

It is necessary to avoid the substitution of the concepts of salvage value and net income from liquidation, which arises from the sale of property after the end of its useful life. The sale of such assets is usually carried out in the most efficient way in order to partially offset the costs of their acquisition in the past.

Legislative incidents.

In everyday practice, there is a problem of normative and legislative regulation of the application of liquidation value and fixing its unambiguous interpretation.

For example, in accordance with the Federal Law of July 21, 1997 No. 119-FZ “On Enforcement Proceedings”, it is required to calculate the market value of property that must be sold at auction within 2 months. But, if it is sold at auction, that is, for a limited period of time, which is typical for non-market conditions of sale, then this does not correspond to the concept of market value enshrined in Article 3 of the Federal Law of July 29, 1998 No. 135-ФЗ “On Appraisal Activities In Russian federation". Moreover, the concept of liquidation value is defined in the “Appraisal Standards Mandatory for Application by Subjects of Appraisal Activities”, approved by a decree of the Government of the Russian Federation.

In this case, appraisers should calculate not the market, but the liquidation value of the seized property. There is a contradiction between various legislative acts.

2. Analysis of the factors that determine the difference between the liquidation value and the market value.

All factors underlying the liquidation value or accompanying it can be conditionally classified (Figure 2).

Figure 2: Residual value factors

Objective factors present in determining salvage value in any situation. Their influence cannot be ignored, and, in fact, they practically do not depend on the state of affairs at a particular enterprise (with the exception of the general state of property). At the same time, all objective factors have a mutual influence on one another. So, for example, favorable market conditions can reduce the optimal exposure time, etc.

The most important factor influencing the differences in market and salvage values ​​is exposition period of the property . At the same time, the shorter the planned exposition period of the liquidated property compared to the optimal one, the stronger the possible cost is reduced.

Diagrams 1-3 show the ratio of the market and liquidation values ​​of real estate in Moscow in 1998-2000. (v %)

Diagram 1: Ratio of market value and the cost of the forced sale of office buildings and premises, %

Chart 2: Market Value to Value Ratio forced sale of commercial buildings and rooms, %

Diagram 3: The ratio of market value and the cost of the forced sale of warehouse and industrial buildings and premises,%

Source: S. Chemerikin "Liquidation value in real estate appraisal".

In fact, the period of exposure of property is a fundamental factor that significantly affects all other factors, both in the direction of strengthening their impact, and weakening. Obviously, with an increase in the planned exposure period, there are more real opportunities for using effective marketing activities, leveling the negative impact of short-term market-forming factors, etc.

General investment attractiveness of the object is based on the individual characteristics of the property (functionality, physical condition) and has a direct impact on the level of consumer demand.

In the case under consideration (during the liquidation of the enterprise), specific factors are activated, which can be conditionally called "selection factors"(in principle, these factors are very close to the factor of investment attractiveness). The essence of these factors is that many objects of the property complex individually do not represent any value and in fact cannot be sold at a normal price, while these objects played a significant role within the liquidated enterprise. The impact of the analyzed aspect on the so-called intangible assets and, first of all, on the business reputation of the company (goodwill), which includes the value of personnel, relations with suppliers, the smoothness of the business structure, etc., is especially negative. When a company is liquidated, it is not possible to realize this, sometimes one of the most valuable assets.

The absolute value of the market value of the object has the opposite effect on the level of liquidity - the higher the market value of the object, the less effective demand for it becomes due to a decrease in the number of potential buyers.

The factors of direct impact on the level of the cost of objects include market conditions during the liquidation period. The longer this period, the more opportunities the company has to analyze the situation on the market and choose the most optimal course of action in the circumstances. And vice versa, with a short exposure period and unfavorable market conditions, losses in the sale of objects will increase even more. And it is at least unreasonable to hope for a general rise in the market during the short period of liquidation of the company.

Marketing Effectiveness is also significantly complicated by the short duration of the period allotted for the relevant activities. However, it equally depends on the specific means used to increase the selling price of the object.

Another important objective factor is psychological aspect forced sale, which is expressed in a certain impact on the initiative of buyers. Moreover, the impact of this factor is also quite twofold - on the one hand, feeling that the seller is in an initially unfavorable situation, buyers begin to dump, but on the other hand, feeling competition with each other, they are afraid to lose the property being sold and are forced to compromise.

Subjective factors reflect the specifics of each particular enterprise. These factors are especially negative in enterprises with inefficient managers, which leads to significant difficulties during liquidation. Such factors include a whole system of phenomena. Thus, the inventory and evaluation of fixed assets of bankrupt enterprises is almost always hampered by the state of accounting registers, the lack of technical passports for equipment and BTI passports for real estate. This series continues with the lack of legal documents for the property, the complexity of accounting, the lack of employees who can provide the necessary explanations. All these facts lead to the fact that before drawing up a specific plan and determining the timing of liquidation, it is necessary in the full sense of the word to "rake" the property of the enterprise, to restore the chains of occurrence of certain obligations both on the part of the enterprise itself and its partners. This leads to a colossal complication of the liquidation process.

However, it would be wrong to think that the factors considered are always only negative. On the contrary, a clear organizational structure and effective conscientious work of the enterprise's divisions can contribute to a significant acceleration of the liquidation processes.

Indeed, instead of spending 3-6 months to identify the current state of the property of the enterprise in case of its ownerlessness, it would be better to use this period to increase the time for the sale of the property complex, which is very important.

Table 1 provides an analysis of the potential challenges and the factors behind these challenges, broken down by property type.

Table 1: Influence of salvage value factors on different types of property

Influence factor	Exposure period	Invest. attractiveness	"Isolation" factors	Market price	Market Conjuncture	Marketing	Subjective factors	Comments
Type of property
Buildings, structures and land	high	high	average	average	high	average	very tall	The legal aspects of registration of real estate, the availability of technical documentation, the individual characteristics of the property are extremely important. The liquidation value, as a rule, differs significantly from the market value.
Intangible assets (trademarks, patents, certificates, etc.)	high	high	high	average	average	average	high	When assessing the liquidation value of this type of property, the legal aspects of its registration are also extremely important, as well as the real benefit that this or that intangible asset can bring to the new owner, taking into account the isolation of this object from the framework of the liquidated enterprise. Buyers for such assets are quite specific, and their search is difficult. The salvage value is often vastly different from the market value.
Construction in progress	very tall	very tall	high	average	average	average	average	Here, the individual characteristics of the object are extremely important and it is difficult to find potential buyers. The salvage value is very different from the market value.
Machinery, equipment and vehicles	medium / high	high	high	average	average	high	average	When assessing the value of this property, the individual characteristics of the object, its functional (moral) depreciation are extremely important. Depending on the age of the property, the differences in the salvage value from the market value are assessed as quite high and medium.
Financial investments (shares, bonds, promissory notes, shares in other enterprises)	high	very tall	average	average	average	high	average	This type of property is often very specific, which complicates the search for potential buyers. In many cases, the financial investments of enterprises in general turn out to be absolutely illiquid. The liquidation value can either differ significantly from the market value or be insignificant up to the point of coincidence (for example, for securities traded on the stock market).
Raw materials	average	high	average	average	high	average	average	This is perhaps one of the few types of assets that can be sold in a fairly short time, depending on their individual characteristics. The liquidation value, as a rule, does not differ significantly from the market value.
VAT	very tall	very tall	very tall	-	-	-	average	This is a very specific type of asset that can be conditionally classified as property. Some of the unrecovered VAT can be attributed to deferred receivables from the budget, which can be used during the life of the enterprise until its complete shutdown at the end of the liquidation process. As such, it is impossible to sell this asset, but it can be partially reimbursed, thereby saving the money received, for example, from the sale of fixed assets of the organization.
Accounts receivable	very tall	very tall	average	short	short	short	average	This type of asset is also very specific. Important in determining its liquidation value is the reliability of the debtor, as well as the maturity of the debt. If the maturity is outside the liquidation period, then you will have to resort to forfeiting operations, selling debts, which will cause a significant decrease in the real money that the liquidated enterprise will receive. The liquidation value of an asset may differ from the market value both significantly and not very much.
Cash	-	average	-	-	-	-	-	In this case, the receipt of funds in full will depend on the reliability of the bank in which the company's settlement accounts are opened.
Future spending	high	high	high	short	short	short	short	This type of property can be sold only if any benefits from its use are preserved. For example, useful software products, etc.

3. General methodological problems of liquidation value calculation.

A simplified scheme for calculating the liquidation value of an enterprise is as follows:

WITH adjusted (revalued) cost of all assets

- the sum of current costs associated with liquidation (costs of maintaining assets until they are sold, etc.)

- the value of all liabilities.

For the purposes of this article, let us dwell on the consideration of the key problems that arise in the calculation of salvage value.

Specific characteristics of liquidated enterprises.

First of all, once again it is necessary to take into account the fact that in the majority of liquidated enterprises the state of accounting for property and its legal support, to put it mildly, leave much to be desired. These facts further exacerbate the problem of the limited timing of the sale. For example, one process of registration of ownership of a particular property takes quite a long time (up to several months). In addition, the technical condition of fixed assets of bankrupt enterprises almost always requires additional capital investments when buying, which narrows the circle of potential buyers. Particular attention should be paid to the definition of functional and obsolescence - as a rule, the fixed assets of such enterprises were acquired a long time ago and do not meet modern technological and functional requirements.

Application of assessment approaches.

In the process of revaluation of the assets of an enterprise, it is possible to use three approaches: income (based on the benefits that can be received by the owner of this property in the future), comparative (based on the sale prices of similar properties on the open market) and costly (based on determining the costs that would be borne by the potential owner upon its acquisition/reconstruction). A natural question arises - which of the approaches should be trusted to the greatest extent when calculating the salvage value?

Based on the fact that the sale time is limited and it is impossible to convey to potential buyers full information about the advantages of a particular asset, and, as a result, the need for the buyer to independently determine the estimated cost of the object by analyzing the open market, it seems appropriate to focus on the comparative (market) approach. However, this does not at all rule out the possibility of using the results obtained in the framework of the other two approaches. Moreover, situations arise in which the use of a comparative approach is generally impossible.

Thus, when deriving the final value of the asset value, it is necessary to pay special attention to the issue of reconciling the results obtained within the framework of the applied approaches. Thus, when coordinating the results of real estate appraisal, the cost approach due to the specifics of the investment climate in Russia should not be given a large share. Investments are mainly made in the construction of residential real estate, in second place are investments in the construction of office buildings. Investments in the construction of industrial and commercial complexes, as a rule, are carried out by large financial holdings, while most of the potential owners of such real estate prefer to purchase already built ones, which in the end is cheaper than construction. Accordingly, the greatest weight in coordinating the results should be given to the comparative approach.

Transition from market to salvage value.

Nevertheless, the main issue that arises when calculating the salvage value remains the question of the transition from the market value of the property to the salvage value. .

In general, salvage value can be calculated in two ways:

¨ The direct method is based solely on the comparative approach. The application of this method is implemented either by direct comparison with analogues, or through statistical modeling (correlation-regression analysis). However, information on transaction prices under conditions of forced sale is difficult to access, which makes it extremely limited in the possibility of using this method. Although in the case of the availability of the necessary information, he has a high degree of objectivity.

¨ The indirect method is based on the calculation of the liquidation value of the object, based on the value of its market value.

The scheme for calculating the salvage value of an object of property using the indirect method is as follows:

market value of the property

–

discount on the fact of forced sale.

Thus, the main methodological problem in this case is the determination of the discount for the fact of forced sale (an amendment reflecting the conditions of the sale).

There are several ways to determine the discount for the forced sale: the method of comparing paired sales (which analyzes the sale prices of identical properties under normal conditions and in a short time of exposition), the method of direct analysis of characteristics and the expert method.

Most often, they turn to the third, expert method, which is due to the fact that the necessary information is limited. As a rule, the discount for the forced nature of the sale is in the range from 20% to 50%. Of course, the value of the correction factor may be different, depending on the specific conditions of liquidation.

In any case, the calculation of this coefficient involves the justification and identification of factors that determine the decrease in the market value of each specific type of property.

So, it is possible to use as a starting point the table proposed in the section "Analysis of the factors that determine the difference between the liquidation value and the market" table. To do this, it is necessary to rank all the factors in terms of importance within each specific object, giving a certain range in which the discount value can vary. At the same time, it should be borne in mind that the total value of the values ​​of the upper ranges of all factors should not exceed 100%.

For example, when evaluating a property, it is possible to carry out the following ranking of factors (naturally, when using the proposed scheme in practice, it is necessary to carefully consider the specifics of a particular situation, which may lead to a different ranking option) according to a 10-point scheme:

Influence factor	The degree of influence on the final result	Evaluation (on a 10-point scale)	forced sale discount range
Exposure time	high	8	8/47*100% = 0-17%
Investment attractiveness	high	8	8/47*100% = 0-17%
Factors of "selection"	Medium	5	5/47*100% = 0-10,7%
Market price	Medium	5	5/47*100% = 0-10,7%
Market conditions	high	7	7/47*100% = 0-15%
Marketing	Medium	5	5/47*100% = 0-10,6%
Subjective factors	Very high	9	9/47*100% = 0-19%
Total value		47	0-100%

After determining the discount ranges for the forced sale in the context of factors, a thorough analysis of the situation is carried out and a specific discount value is selected for each factor, after which the obtained values ​​are summarized.

Similar calculations are made for all types of property belonging to the liquidated enterprise.

4. For whom is the liquidation value calculation necessary, and why involve an appraiser?

Determining the liquidation value is aimed at solving a number of problems that directly depend on the consumers of this information. As the main users (in most cases, customers) of the final calculation of the liquidation value, credit managers, arbitration managers and enterprise managers are distinguished.

credit managers.

When granting a loan secured by a pledged property, an important step is the valuation of this property. It is advisable to entrust this calculation to qualified specialists in the field of appraisal, that is, to carry out an independent appraisal. to determine salvage value. The real fact of the implementation of the object may not take place. However, in order to provide a loan in a reasonable amount, the lender needs to know at what price, if the funds are not returned, it will be possible to sell the collateral, that is, with a forced sale and a reduced exposure period. Timely calculation of the liquidation value allows avoiding the issuance of unreasonably high loans and speeding up the process of selling collateral.

Arbitrators.

In the process of liquidation of the enterprise, to speed up the process of selling assets, it should contribute to the assessment of objects. An early determination of the liquidation value, along with an analysis of the financial condition of the debtor, leads to the adoption of an informed decision on the procedures and timing of the auction. Thus, an increase in the exposure period of assets contributes to the growth of their value.

Leading managers.

The significance of salvage value calculations for executives is twofold.

Firstly, the acquisition of assets at liquidation value allows enterprises-buyers to receive obvious benefits both in the case of further resale of property at market value (in the form of the difference between the market and liquidation values), and in the case of its operation (in a different situation, the acquisition of similar property cost would be more expensive).

Secondly, senior managers need to remember that one of the directions of business restructuring (reorganization) is the strategic direction. Within its framework, measures are taken to merge, take over companies, and partially liquidate a business in a short time. As a rule, any decision on the future fate of an enterprise is based on the development of several development options, among which the possibility of its liquidation is also provided.

In this way, involvement of qualified assessment specialists will maximize the efficiency and timing of the liquidation value calculation, which is an important component of the final result of the liquidation process as a whole.

List of used literature:

1. "Business valuation": ed. A.G. Gryaznova, M.A. Fedotova - M.: Finance and statistics, 2000.

2. V. Galasyuk "On the definition of the concept of liquidation value."

3. V. Galasyuk "Increasing the value of the enterprise with the help of liquidation value."

4. S. Dolgin "The procedure (features) for assessing the liquidation value of the bankruptcy estate."

5. Yu. Kozyr "Assessment of liquidation value".

6. S. Chemerikin “Liquidation value in real estate valuation”.

"Evaluation standards that are mandatory for the use by the subjects of valuation activities." Approved Fast. Government No. 519 dated 06.07.2001

International Glossary of Business Valuation Terms (The National Association of Certified Valuation Analysts (NACVA)).

Liquidation value - this is the valuation of a real estate object or company assets in cash, when selling on the market in a short period of time, with an urgent need to generate revenue.

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This is the amount that the seller has to agree to, because due to the limited time of the transaction, it is not possible to familiarize all potential buyers with the property being sold.

The price during the reorganization of the enterprise can be determined for any property owned by the enterprise. To do this, use the balance sheet of the enterprise for the last reporting period. Each section of the asset and liability is considered in detail, determining the assets in use, receivables and payables, as well as the amount of obligations that must be repaid with the proceeds after the sale of funds.

The property of the company includes:

1. Fixed assets. This is real estate, equipment, cars and other property, more than 10,000 rubles, the period of use is more than 1 year.
2. Securities, bills. Owning them, the company makes a profit, but their implementation can also bring not a small income. It can be shares of another company or bonds.
3. Intangible assets. These are objects that do not have a physical form. These include licenses, patents, copyrights, intellectual property, etc.
4. Products for production.
5. Ready goods in warehouses.
6. Materials in the pantry.

Determining the liquidation price of all these balance sheet items is necessary in various cases, but in any of them, we are talking about an urgent transaction in a limited time, in order to generate income.

When does liquidation value arise?

The use of this concept is necessary in a number of cases:

1. liquidation of the organization.
2. Sale of collateral.
3. Flash sale of all properties.

Liquidation of the organization is divided into two types:

1. Planned- when the company terminates its activities by decision of its founders. This happens if a decision is made to reorganize or restructure the company, for example. At the same time, a plan for the sale of property is drawn up, the amount of profit received is determined, depending on the depreciation of the asset, its relevance and other factors. The property sale is proceeding as planned.
2. Forced- We are talking about the bankruptcy of a legal entity. At the same time, all property is evaluated and the so-called bankruptcy estate is determined. Further, it is realized through bidding, in the shortest possible time.

When selling collateral property, the use of the concept of the liquidation price of property is necessary to determine the lower limit of the loan or credit amount. Determining this type of value, the lender can clearly understand what minimum amount he can receive when selling such an object, in case the borrower defaults on the loan.

If such a situation occurs, the property will be sold to pay off obligations under loans and borrowings.

In case of emergency sale of all existing property, time is usually very limited. There are also two types of implementation.

It, as in the first case, is voluntary and forced:

1. Voluntary sale of objects occurs in the case of the sale of the entire enterprise. After that, it continues its activity further.
2. In the case of a forced sale, the seized property is sold in the course of litigation, in case of non-payment of taxes by the enterprise or other violations of the law. The transaction is taking place in an accelerated mode, due to the need to urgently pay off the resulting debt, since its amount increases every day by the amount of penalties and fines.

But whichever option is used, in any case, the time for the transaction is very limited. Non-payment on loans and borrowings leads to an increase in debt, due to the addition of fines and late fees to the principal amount of the debt. Therefore, the time during which the borrower can receive money for his property plays a decisive role.

Legislative incidents

In modern legislation, there is no unambiguous definition of liquidation value and clear cases of its application.

So in the law No. 119-FZ of July 21, 1997 No. the governing rules of the concept in enforcement proceedings, it is necessary to calculate the price of the property at the market price, which must be sold at auction within 60 days.

And if it is sold through bidding, that is, in a short time frame, which is typical of non-market methods of marketing. All this does not fit the definition of market value, described in the law No. 135-FZ of July 29, 1998, which establishes the rights and obligations in the valuation sphere. In such a situation, appraisers in their activities should use not the market price, but the price of the property that has been seized.

Factors affecting salvage value

If it is necessary to calculate the liquidation value of the property of a legal entity, it is not always easy to do this, since many factors influence its size:

1. Time. As a rule, in such cases, the terms for the sale of real estate are very short. And in a short period of time, finding a buyer who agrees to a deal at an affordable price is not so easy. Therefore, you have to go to reduce the cost of the object. The dependence is very simple - the less time for the sale, the lower the proceeds from the sale of property.
2. Demand. Depending on the demand at a given time for a particular type of property, the maximum price at which it can be sold depends. If the demand is high, then the sale will be carried out as soon as possible, and the seller will receive the maximum benefit.
3. Attractiveness. The more interested the buyer is in acquiring the enterprise, the more profitable the deal. Here much depends on the condition of fixed assets, their wear and tear, and the staffing of the enterprise as a whole.
4. Field of activity. Much depends on what kind of activity legal entities are engaged in, and how competitive and economically profitable it is. If the company occupies a certain niche in the market segment and the product or service sold to it is in demand, the proceeds from its property increase significantly.
5. Force Majeure. It is also necessary to take into account other, independent circumstances, which, if they arise, may have a significant impact on the amount of proceeds from the transaction.

Liquidation value estimation methods

We figured out the definition a bit, now it’s worth considering how to value property and what methods exist for this. There are two main evaluation methods: direct and indirect.
The direct method of calculation is based on a comparison with an analogue, and can be carried out visually or using statistical analysis.

But this method is uninformative under the conditions of Russian legislation, since it is forbidden to disclose information about transactions in forced sale, as well as the amount received when they were completed.

An indirect way is to calculate the cost taking into account the market.

It includes three steps:

1. Determination of the market price of the object.
2. Calculation of the discount that arose due to the urgency of the transaction.
3. Direct calculation of the liquidation price.

And to calculate the value of the object during liquidation, they calculate the difference between the proceeds from its sale and the costs associated with its implementation. But at the same time, it is better to seek the help of qualified appraisers, as they have extensive experience and information, in order to give a more accurate estimate of the proceeds from the transaction.

Liquidation valuation, what difficulties may arise

Sometimes when an enterprise breaks up, it is quite difficult to determine how much its assets are worth. What problems can you face?

The main difficulty in real estate transactions, when eliminating a legal entity, is the limited time for sale. Registration of the transaction and the transfer of ownership is not a simple and fast process. And in order to meet the deadlines, and for this you have to resort to lower prices.

Another difficulty is that the circle of potential buyers is significantly narrowing, and not all of them can get acquainted with the terms of the transaction, this, again, is due to the transience of the transaction.
Also, in an unstable economic environment, it may be necessary to reduce the amount of proceeds for real estate, due to a decrease in the solvency of buyers.

Liquidation value assessment in a crisis

The unstable economic situation affects all aspects of people's lives and activities of the enterprise. It also significantly affects the determination of the value of assets during the reorganization of the organization. One of the signs of instability in the economy is the release of jobs. All industries and business areas suffer at the same time, losing profits, and some do not withstand such a situation at all.

But there are also positive aspects in this situation. Real estate is getting cheaper and you can start acquiring it or investing money in it. This requires a detailed analysis of the market to determine the real value of objects. At a time when the economy is stable, all real estate properties are sold at market value, but in a crisis, you have to adapt to the market situation.

Here, the salvage value is used, that is, it is the market price, taking into account discounts on various factors that affect it in the direction of reduction. As the crisis progresses, all these factors become more relevant due to instability in the economic and financial sphere.

The difference between salvage value and market value

Before understanding the differences between these types of prices, it is necessary to define the market price.

Market price- this is the amount of money that can be received for an object on the market, in conditions of open competition, when each of the parties to the transaction acts consciously, taking into account all the available information about the object, and extraneous, extraordinary factors do not influence the price of the object.

At the same time, there is enough time for sale to ensure that a sufficient number of potential buyers can familiarize themselves with the terms of the transaction. All information about the subject of the transaction is maximally available, and each of the parties can easily use it. At the same time, the transaction amount suits both parties, for the buyer it is the minimum of the proposed ones, and for the seller, on the contrary, the maximum.

The absence of influencing extraordinary factors means that both the seller and the buyer act in their own interests, without pressure. Therefore, the whole operation takes place as planned, without haste and in a fairly long time.

This is the main difference between these types of prices. In fact, the liquidation cost is equal to the market one, but taking into account the factors affecting it downward. And the main factor is the time frame during which it is necessary to carry out the sale. That is, the liquidation tariff differs from the market one in that it is not influenced by third-party factors, and its size is set in accordance with the state of the market at the present time.

How is the transition from the market price to the liquidation price

These two concepts of value exist in parallel with each other, and the liquidation price directly depends on the market price. When using the indirect method of real estate valuation, these types of prices are compared, for the final price calculation. In this case, a discount is calculated for the urgency of the transaction.

It can reach up to 50% of the market value of the object. The size of the discount depends not only on time limits, it is also influenced by market demand, the state of the economy and the financial condition of the enterprise. It is important to conduct a detailed analysis of all indicators in order to obtain the most adapted value for a specific type of property.

Thus, the transition is carried out when assessing the property of a legal entity by an indirect method, taking into account various factors.

The value of a property usually refers to its market value. However, there are other types of value of real estate, which are sometimes necessary to complete a particular transaction with it. So, in a number of transactions the salvage value of housing is used. What is its difference from the market? In what situations is it required to determine it?
“Market value is the most probable price at which a property can be sold in the near future,” says Inna Ignatkina, director of the department of MITs-Nedvizhimost (MIC Group). – The market value depends on a number of factors (transport accessibility, type of house, footage, etc.). Only a professional appraiser or an experienced real estate agent can determine the market value of a property most accurately. Often, home sellers, who are poorly oriented in the real estate market, set prices for the objects being sold, which differ significantly from the average market indicators. Of course, everyone wants to sell their apartment at a higher price. However, the opposite also happens. Thus, an owner who wants to reduce the exposure time of the housing for sale can set a price below the market price. In this case, we are talking about the salvage value of the property. “In other words, the salvage value is the value of housing that the seller will have to agree to if he needs to quickly sell the property he owns,” say MIC-Real Estate. It is noteworthy that when issuing a mortgage loan, most credit organizations take into account not only the market value, but also the salvage value of the dwelling. This is done mainly so that in the event of a default by the borrower, the collateral could be sold without delay. If the bank puts housing on the market at a price close to the market price, this will delay the process of selling the object. It will be difficult for a person who does not understand the situation on the real estate market very well to independently determine both the market value and the salvage value of the housing he owns. “Practically every real estate site today has an online calculator that, by analyzing the data entered by the user, determines the cost of an apartment,” says Inna Ignatkina. - However, you need to understand that such programs do not take into account a number of pricing factors and nuances, and therefore the real price cannot be calculated in this way. It is not for nothing that experienced appraisers and realtors always try to go to the property and inspect it personally in order to take into account all the features of housing, from transport accessibility to the quality of repairs in the apartment. Therefore, in the course of preparing for a serious transaction, it is recommended to contact professionals”