High Value Assets The Variable Tax Rate Phenomenon In Tax-Adjusted Cap Rate Formulas By Mark Pomykacz Prepared: Wednesday, July 30, 2003 Introduction It is now widely acknowledged that capitalization rates can and should be adjusted for the property tax rate, while the net income should be calculated without the property tax expense, in order to accurately estimate the market value of income producing properties for property tax assessment purposes; however, the standard property tax adjusting methods assume that the property tax rate is invariable. In fact, for high-value assets, those that represent a substantial portion of the taxing jurisdiction’s taxable base, the property tax rate is dependent on the market and assessed values of the high-value asset. Applying the standard property tax adjusting methods to high-value assets will result in over-estimated market and assessed values, but under-estimated tax rates, and municipal budget short falls [1]. This article explains this phenomenon and presents a formulaic solution that greatly improves appraisal accuracy and budgeting. The formula is easy to use and cost effective. Additionally, this article presents practical steps for employing the analysis. It is expected that the formulas and processes presented herein will be widely used in the planning, negotiation, litigation, and settlement of property tax disputes for high-value properties to the benefit of both the taxpayer and the taxing jurisdiction. The taxing jurisdiction will benefit from the avoidance of previously unexpected changes to the tax rate, allowing more accurate budget planning. Furthermore, it will permit the full capture of the taxable base. For the taxpayer, it will provide sound appraisal rationale for relief from under-estimated tax rates, which result in over-estimated assessments and over taxation. The Variable Tax Rate Phenomenon To understand why tax rates are variable and dependent in the assessment analysis process, analysts must recognize that 1) tax rates are based on assessed values, but 2) for income-generating properties, assessed values are based, in part, on tax rates. Table I Basic Tax Rate and Value Formulas [2] Tax Rate = Budget ¸ Sum of all Assessed Values in the Taxing Jurisdiction ( T = B ¸ Sall ) Assessed Value of Subject High-Value Asset = Income before Property Taxes ¸ (Capitalization Rate + Tax Rate) ( As = I ¸ (C + T) ) When the assessed value of one high-value asset is wrong, then the sum of all assessed values and the tax rate are computed wrong. When the tax rate is wrong, then the assessed value of the highvalue, income-producing assets are computed wrong. Only when both the assessed values of all high-value assets and the tax rate are correct will the assessment process work properly. Each depends on the other. This is a circular analysis, or co-dependent analysis. The assessment process often proceeds as presented in Table II, for income-generating properties. Table II Example of Assessment Process  Column/Iteration 121High-Value Asset’s Income Before TaxesI$7,500,000$3,750,0002Capitalization RateC10%10%3Assume Tax RateT12.5%12.5%4Tax Adjusted Cap Rate $60,000,000$30,000,0005Assumed Assessed Value of High-Value AssetAs$60,000,000$30,000,0006Assessed Value of High-Value AssetAs$60,000,000$30,000,0007Assessed Value of All Other AssetsS$140,000,000$140,000,0008Sum of All Assessed ValuesSall$200,000,000$170,000,000 Cross Checks   8BudgetB$5,000,000$5,000,0009Indicated Tax Rate for BudgetB2.5%2.941176%10Assumed Tax RateT2.5%2.5%11Consistency YesNo12Sum of All Assessed ValuesSall$200,000,000$170,000,00013Assumed Tax RateT2.5%2.5%14Jurisdiction RevenuesB$5,000,000$4,250,0015BudgetB$5,000,000$5,000,00016Balanced Budget YesNo17Indicated Tax rate for BudgetT2.5%2.41176%18Taxes on high-Value Asset 1,500,000882,35319Income After TaxesI$6,000,000$2,867,64720Capitalization RateC10%10%21Indicated Value of High-Value AssetAs$60,000,000$28,676,47122Assumed Assessment of High-Value AssetAs$60,000,000$30,000,00023Consistency YesNo If the budget is $5 million and the sum of all assessed values is correct, at $200 million, then the tax rate is correct at 2.5 percent (See Line 11, Column 1, Table II). If the assessed value of the high-value assets are estimated based on the 2.5 percent tax rate, then all elements of the assessment process are consistent (See Lines 11, 16 and 23, Column 1, Table II). If the value of one high-value asset should need a substantial correction, then the sum of the assessed values for the jurisdiction would be substantially impacted (See Line 8, Column 2, Table II). Consequentially, the tax rate would need to be corrected in order to maintain the budget (See Lines 11, 16 and 23, Column 2, Table II). Failure to correct the tax rate will result in failure for the revenues to meet the budget, and therefore, an improper assessment on the high-value asset. The Iteration Solution The appraiser can solve this problem using an iteration process. The appraiser estimates a corrected tax rate, calculates the assessed value of the high-value asset and the sum of all assessed values, and cross checks the conclusions with the assumptions. When the conclusions and assumptions do not match, then the appraiser attempts another estimate. The example from Table II is solved using iteration, in Table III below. Table III Example of Iteration Process  Column/Iteration 1234511 High-Value Asset’s Income Before TaxesI$ 7,500,000$3,750,000$ 3,750,000$ 3,750,000 2Capitalization RateC10.000000%10.000000%10.000000%10.000000% 3Assumed Tax RateT2.500000%2.500000%2.958978%2.959702% 4Tax Adjusted Cap Rate 12.500000%12.500000%12.958978%12.959702% 5Assumed Assessed Value of High-Value Asset As$ 60,000,000$ 30,000,000$ 28,937,468$ 28,935,850 6Assessed Value of High-Value AssetAs$ 60,000,000$ 60,000,000$ 28,937,468$ 28,935,850 7Assessed Values of All Other AssetsS$ 140,000,000$ 140,000,000$ 140,000,000$ 140,000,000 8Sum of All Assessed ValuesSall$200,000,000$ 170,000,000$ 168,937,468$ 168,935,850  Cross Checks      8BudgetB$ 5,000,000$ 5,000,000$ 5,000,000$ 5,000,000 9Indicated Tax Rate for BudgetB2.500000%2.941176%2.959675%2.959703% 10Assumed Tax RateT2.500000%2.500000%2.958978%2.959702% 11Consistency YesNoNoNo 12Sum of All Assessed ValueSall$ 200,000,000$ 170,000,000$ 168,937,468$ 168,935,850 13Assumed Tax RateT2.500000%2.500000%2.958978%2.959702% 14Jurisdiction RevenuesB$ 5,000,000$ 4,250,000$ 4,998,822$ 4,999,998 15BudgetB$ 5,000,000$ 5,000,000$ 5,000,000$ 5,000,000 16Balanced Budget YesYesNoNo 17Indicated Tax Rate for BudgetT2.500000%2.941176%2.959675%2.959703% 18Taxes on High Value Asset 1,500,000882,353856,455856,415 19Income After TaxesI$ 6,000,000$ 2,867,647$ 2,893,545$ 2,893,585 20Capitalization RateC10.000000%10.000000%10.000000%10.000000% 21Indicated Value of High-Value AssetAs$ 60,000,000$ 28,676,471$ 28,935,450$ 28,935,847 22Assumed Assessed Value of High-Value AssetAs$ 60,000,000$ 30,000,000$ 28,937,468$ 28,935,850 23Consistency YesNoNoNo  The Algebraic Solution [3] The iteration technique, while intuitive, is cumbersome. As an alternative, the appraiser may wish to employ “Value/Tax Rate Algebraic Solution”. The algebraic proof follows. Table IV Algebraic Proof Definitions Property Tax Rate = T Taxing Jurisdiction Budget = B Subject Property Net Operating Income before Property Taxes = I Subject Property Capitalization Rate = C Subject Property Assessed Value = As Sum of all Other Assessed Values = S Known Relationships Tax Rate, Budget, Assessment Base Formula T = B ¸ ( As + S ) Income Capitalization, using a Property Tax-Weighted Capitalization Rate As = I ¸ ( C + T ) Given Data Supplied by Taxing Jurisdiction: B and S Estimated by Appraiser: I and C Derivation [4] T = B ¸ ( As + S ) Substitute I ¸ ( C + T ) for As T = B ¸ [{ I ¸ ( C + T )} + S ] Transform using Algebra T = B ¸ [{ I + S ( C + T )} ¸ ( C + T )] T = { B ( C + T )} ¸ ( I + S C + S T ) T ( I + S C + S T ) = B ( C + T ) T I + T S C + S T2 = B C + B T T I + T S C + S T2 – B C – B T = 0 S T2 + T I + T S C – B T – B C = 0 S T2 + T ( I + S C – B ) – B C = 0 Use the quadratic formula to solve for T T = [ B – I – S C + {( I + S C – B )2 + 4 S B C}½ ] ¸ 2 S The Value/Tax Rate Algebraic Solution T = [ B – I – S C + {( I + S C – B )2 + 4 S B C}½ ] ¸ 2 S Cross Check Use data from Column 2, Table II; T = [ B – I – S C + {( I + S C – B )2 + 4 S B C}½ ] ¸ 2 S T = [ 5,000,000 – 3,750,000 – 140,000,000 x .10 + {( 3,750,000 + 140,000,000 x .10 – 5,000,000) 2 + 4 x 140,000,000 x 5,000,000 x .10}½ ] ¸ 2 x 140,000,000 T = 2.959703% Thus, As = I ¸ ( C + T ) As = 3,750,000 ¸ ( .10 + .02959703 ) As = 28,935,848 And T = B ¸ ( As + S ) T = 5,000,000 ¸ ( 28,935,779 + 140,000,000 ) T = 2.959703% Therefore, the assumed tax rate is consistent with the indicated tax rate and the Value/Tax Rate Algebraic Solution works! Practical Considerations Now that the theory and mathematics have been established, there remain only a few practical considerations before the appraisal community can widely deploy this new technique, the “Value/Tax Rate Algebraic Solution”. The appraiser must estimate the given inputs to be entered into the formula. The appraiser should continue to estimate the net operating income before property taxes and the capitalization rate as the appraiser has always done. New to the appraiser’s research and analysis work is the need to estimate the budget for the taxing jurisdiction and sum of the assessed values for all other properties in the jurisdiction. To complete this work, the appraiser will need to research and analyze the historical trends and future expectations within the taxing jurisdiction. Historical data will provide the customary basis for a projection of both the budget for the taxing jurisdiction and the sum of the assessed values for all other properties in the jurisdiction. Of course, adjustments to the historical trends may be needed to stabilize trends, to account for abnormal trends, or to account for anticipated changes to historical trends for inflation, structure change, and social and political activity. Interviews with the authorities at taxing jurisdiction and reviews of market-wide general economic and real estate industry market forecasts will be useful. This new research and analysis may not be mindlessly simple, but often the most basic forecasting techniques will suffice to greatly improve the accuracy of the assessment process. Furthermore, the difficulties with precisely forecasting budget and general assessed values are mitigated by recognizing the fact the between the tax rate and the assessed values, there must always be enough municipal revenue generated to support the budget, which often grows year after year, regardless of the health of the real estate market. Between the three - budgets, assessed values, and tax rates – value increases perennially, assuming all else remains constant. Assessed values oscillate up and down, but are generally up year by year, and tax rates make up the difference. Conclusion In conclusion, now that the theory and mathematics have been established, the appraiser can estimate assessed values and forecast budgets with a new and greater accuracy. Given the simplicity and the ease of use of the “Value/Tax Rate Algebraic Solution”, the appraisal community should have little difficulty adding this tool to its repertoire. The formulas and processes will need to be integrated into automated valuation models and mass appraisal systems. It is expected that the formulas and processes presented herein will be widely used in the planning, negotiation, litigation, and settlement of property tax disputes for high-value properties to the benefit of both the taxpayer and the taxing jurisdiction. The taxing jurisdiction will benefit from the avoidance of previously unexpected changes to the tax rate and budget, allowing more accurate budget planning. Furthermore, it will permit the full capture of the taxable base. For the taxpayer it will provide sound appraisal rationale for relief from under-estimated tax rates, which result in over-estimated assessments and over taxation. [1] Strictly speaking, the error with the standard formulas occurs on properties of all sizes, but the magnitude of the error is not material on smaller properties, unless the error occurs throughout a group of smaller properties. [2] This article assumes that the assessed value to market value ratio (AKA equalization rate) is 100 percent. Thus, assessed values equal market values, and the nominal tax rate equals the effective tax rate. The formula and processes proposed in this article work equally well with assessed value to market value ratios of other than 100 percent, but only after proper adjustments are made for the assessed value to market value ratio. For details on the proper adjustments for the assessed value to market value ratio, see “The Next Generation in Weighted Cap Rates”, (add link when ready), by Mark Pomykacz, MAI. [3] © 2003. The contents of this article, and specifically the Value/Tax Rate Algebraic Solution are copyrighted by Mark Pomykacz. All rights reserved. This article, and any part thereof, may not be used, copied, modified, or distributed by any means without the express written permission of Mark Pomykacz. Also, the use of the procedures and specifically the “Value/Tax Rate Algebraic Solution” are prohibited without the express written permission of Mark Pomykacz. [4] Special acknowledgement and thanks to Professor Xiaochun Rong, Rutgers University, New Brunswick, NJ, Math Department, for his assistance with the completion of the algebra.

Power Asset Taxes 7.30.03 Mark Pomykacz, Managing Partner, Federal Appraisal & Consulting LLC UTILITY COMPANIES ARE CURRENTLY SUFFERING A DOUBLE BODY BLOW. They are currently suffering a dramatic industry-wide decline. And in many areas of the country, they are suffering through the negative effects of deregulation; however, while these conditions certainly have a negative impact on power asset values, the effects can be mitigated by acting to reduce property taxes. The tax manager who is knowledgeable of recent industry and assessment events and their implications can find a silver lining in property tax management. Given that property taxes are often the third largest operating expense behind fuel and payroll, the proper managing of property taxes can substantially improve net income and thus preserve company value. Currently, four factors are impacting utility assessments in dramatic ways; the recent dramatic industry-wide decline, deregulation is negatively affecting utility’s income, deregulation mandates the income approach, and structured leases may serve as the basis of assessment. Assessors are forewarned. State-level law makers and regulators, in their enthusiasm to deregulate for the benefit of state-wide consumers, forgot to warn local taxing jurisdictions that their local budgets would be negatively impacted. Deregulation was designed to reduce the cost to utility consumers and thus, income to utility companies. An axiom of appraisal mandates that if income declines, value declines. Since property taxes are based on values, logically and actually, deregulation is lowering property tax assessments, taxes, and local budgets. Note that the deregulation impact is a one-time event, lasting the first several years after deregulation, and resulting in a new permanently lower value for the deregulated assets. Given the size of contribution of power assets to the tax rolls and given the dramatic industry decline, assessors should take special steps to plan for a major loss in municipal income for the next several years, until the industry recovers. Active Tax Managers will carry the day. Jurisdictions are being taken by surprise when utilities successfully argue to dramatically reduce their taxes, due to deregulation and the industry decline. Industry-specific market details, such as In Archive May 2021 July 2020 June 2020 April 2020 March 2020 August 2017 August 2014 April 2014 electricity deregulation, are out side the daily experience of many assessors. Assessors are rarely given the resources to cover such industry-specific events. Additionally, the power industry is currently in a different phase of the economic cycle than the general economy and the real estate industry. Real estate has been doing better than the general economy, while the electricity power industry is truly in a bad state. Real Estate has been doing rather well in many markets. Unless property tax managers act to provide the power industry-specific information, assessors sometimes assume the industry is on par with the general economy or with real estate. Unlike income taxes, where the taxpayer estimates what their taxes should be, and the IRS reacts if the IRS believes the taxes are too low, property tax managers are fundamentally reactive. For property taxes, the jurisdictions decide what the owners should pay, and the owner reacts. This arrangement is to the disadvantage to the passive tax manager, given that the power industry is out of phase and going through a very rough period. The opportunity to lower property taxes will only last for several years, as of course, the industry will recover eventually, and the initial impact of deregulation will pass. The Income Approach for deregulation. Another major surprise for both the inexperienced assessor and tax manager is the switch in appraisal methodology necessitated by deregulation. In the old regulated market days, the cost approach was king. In deregulated markets, the income approach rules. Under regulation, if the utility built it, the consumer will pay (based on the cost and the permitted return on the cost). In a deregulated market, there are no guarantees of recapture of costs. Investors, thus, look to the quantity and quality of the cash flow (an income analysis, with normal market considerations of risk and return). This presents a host of assessment management issues, including appraisal, engineering, legal, and corporate management. Old school power engineering consultants will not be up to the task of estimating assessed value via an income analysis. While most traditional real estate mortgage appraisers will not have the engineering experience needed for electricity power facilities. Given that local assessment laws are often specialized for power facilities, experienced legal advice may be needed to negotiate and litigate the transition to appraisals for deregulation. Recent legal precedents confirm this valuation methodology. Additional precedents may be required to sustain the methodology and obtain the proper tax assessment under deregulation. The fundamental argument in favor of the switch from a cost basis of assessment to an income basis is that deregulation is at its heart, the establishment of competitive markets. In competitive markets, the cost to build periodically diverges from the income-based value as the market cycles through periods of growth and decline. In periods of decline, the income approach indicates a lower value than the cost approach (calculated before external obsolescence). Yet, since in deregulated markets, investors will not pay more for an asset than the value based on its cash flow, the cost approach value exceeds the market value in a declining market. The Wild Card, Structured Leases. The assessment law in some jurisdictions permits the appraisal of real property based on the leases in place. There are a number of usability criterion, but the most important are that the lease be at market levels and between unrelated parties. Over the last decade, many power assets have become subject to leases created through structured finance arrangements. By their nature, no structured lease is intrinsically disqualified from being the basis of assessment, in jurisdiction permit appraisals based on leases in place. Many structured leases can pass all the usability criterion. Some structured leases would yield higher assessments, others, lower assessments. Copyright 2003 CyberTech, Inc. Readers Comments DateCommentGeorge Kamburoff 8.5.03This is well-written and timely, and the author makes a good exposition of the issues. He misses an important point, however. Taxes are the price we pay for civilization. That load must be borne by the wealthy as well as the workers. Do we really want to keep finding ways for millionaires and businesses to dodge their fair share of the taxes that pay for our (and their) police, fire, and social services? If we continue this madness, Leona Helmsly will be proven right when she explained conservative tax policy as: “Only little people pay taxes”.Jack Sprat 8.13.03Mark has a point in theory, but in actual practice many power companies may find themselves paying higher rather than lower real estate taxes. For many years, utilities paid taxes on outdated power plant property values. They often argued with local jurisdictions about the low values of their generating plants and often used their depreciated plant values to convince tax assessors that the actual market values of their plants were miserably low. Recently those utilities sold their plants to independent power producers for the fair market values based on the plants’ projected earnings which was often many times greater than the plants’ depreciated or book values. It’s hard to argue with a local tax assessor that a plant you just paid $10 million for is really only worth $3 million which was the previous tax assessment value. Fair market value is fair market value, and the Utilities made a bundle selling plants, which the ratepayers had paid much of the depreciation on, for market value. That was one of the lies of deregulation– that the rates would go down. How can rates go down when the ratepayers start paying the carrying charges on the fair market value of the generating plants instead of the depreciated value which is all the utilities were allowed to charge in their approved regulated rate bases? With new full market prices for power plants come full market taxes. If the taxing jurisdictions really understood how to compute the fair market value of power plants, based on their income potential, the taxes on power plants would go up almost across the board nationally. The new independent power producers had better hope the tax assessors don’t find out just how far out of whack their taxes are and hire the expertise to do fair market value computations for the generating plants in their jurisdictions.

Tax Saving Ideas The following is a list of often overlooked expenses and tax deductions that pertain to the real estate industry and could improve after tax cash flow. Appraisal fees for charitable donations or casualty losses Appreciation on property donated to a charity Casualty losses Commissions and closing costs on sale of property Dues to labor unions for property staff Property improvement costs Investment advisory fees Lead paint removal Mortgage prepayment penalties and late fees Points on a home mortgage and certain refinancings Real estate taxes associated with the purchase or sale of property Seller-paid points on the purchase of a home Special equipment for the disabled for ADA compliance State personal property taxes Theft or embezzlement losses Trade or business tools with life of 1 year or less Self-managed real estate 401K for the self-employed

Valuation and Litigation The Deloitte & Touche Real Estate Newsletter for Attorneys Published Spring, 2000 Considerations for Valuation and Litigation By Mark Pomykacz Perhaps today, litigating our differences has become a normal business venue. Certainly, experience indicates that even the best intentions and the most prudent management practices can offer no guarantee of avoiding litigation. Given that real estate is one of the most expensive business and personal activities, it is not surprising that subtle differences between parties lead to disputes over large dollar amounts. Disputed real estate valuations often range in the millions of dollars and sometimes in the $10’s of millions. Even leasing disputes can amount very large, disputed valuations. Over a seven-to-ten-year lease period, many aggregated lease payments will exceed the value (sale price) of the property. Furthermore, the complexity of real estate valuation unfortunately leaves room for dramatically different opinions of value, rent, and damages. The scale of real estate valuations and the complexity of such valuations require the use of real estate valuation experts. Some sample valuation for litigation issues include: Bankruptcy and Reorganization Issues Property Tax, Estate Tax, Transfer Tax, Other Tax Issues Contract Disputes, Contract of Sale Issues, Landlord-Tenant Issues Partnership Disputes, GP Mis-management, Partial Interest Issues Environmental Damages, past and future lost income, stigma and cost to correct Condemnation and Takings Insurance Claims Once a dispute over real estate valuation is recognized as possibly destined for court, our advice is to prepare earlier, prepare intensely, use the right professionals, and interact deeply with your litigation team. Presented below are basic considerations when working on litigation involving valuation issues. While some disputes are centered on a valuation, most are cases where valuation issues arise in the context of proving a contractual default and/or where once a default has been established, the dollar damages must be estimated. The term “valuation” herein is intended to also include income and yield analysis and estimation. Many of the biggest cases never require a value (sale price) estimate. Partnership disputes, insurance claims, poor management and the resultant poor yield, and lost income often involve disputes over expected income and yields, all of which real estate appraisers are suited to handle. Also discussed below are some of the more common mistakes made by clients, appraisers, and litigators. The considerations below are not arranged in order of either chronology or priority, except for the paramount consideration, which immediately follows. It is paramount to maintain the appraiser’s independence and objectivity. Even the perception of tainted objectivity could destroy their effectiveness as an expert witness. Identify and Clarify the Valuation Issue Unless a client and/or their attorney are experienced with the particular valuation issues at hand, the valuation experts should be consulted as early as possible. Also, unless the appraiser is experienced with the particular valuation concerns surrounding legal issues at hand, the attorney should be consulted as early as possible. Neither the appraiser nor the client and their attorney should make assumptions about the appraisal methodology, the scope of the problem, or the legal strategy without first consulting the other. ♦ The “Full Narrative, FIRREA” type report is often not appropriate for litigation purposes. Appraisals prepared for one purpose and use (or for one litigation case) are often not appropriate for (another) litigation. Appraisal methods and reporting formats vary dramatically and this is appropriate as appraisal issues vary dramatically from case to case. ♦ A preliminary analysis is often helpful for measuring the scope of the problem and testing valuation and legal strategy, but great care must be exercised to avoid the reality and perception of an expert with tainted objectivity. ♦ Different practical appraisal problems require different appraisal methodologies, procedures, and reporting formats. Often the supply of data to be analyzed in the appraisal, or lack thereof, drives the appraisal methodology. Thus, the expert appraiser and the attorney experienced in one type of case may not be able to predict the valuation needs of another case, at the outset. ♦ There must be a continual dialogue beginning in the earliest stages of the case, between the appraiser, the client, and their attorney to resolve and sharpen the legal strategy and appraisal methodology. Protect Client-Attorney Privilege Clients should not hire the appraiser directly and should limit their discussions until the attorneys have hired the appraiser. All working documents prepared by the appraiser for a case should be labeled “draft”, “confidential”, or “prepared for counsel in connection with litigation”. Select Valuation Experts that Meet the Needs of the Case and Round out the Team ♦ Is a designated (MAI) appraiser required? ♦ Is a state licensed appraiser required? Will the expert’s report need to be USPAP and/or FIRREA compliant? ♦ Will other types of experts be needed to support the valuation opinions, e.g.: accounting, environmental, engineering, architectural, zoning, financial or brokerage. Ensure that the Legal Strategy Matches the Most Defensible Valuation Methodology Some valuation methodologies preferred by investors and owners, like the discounted cash flow (DCF), are commonly disbelieved by judges and juries. Conversely, sometimes legal precedents vary sufficiently from the circumstances in the case at hand to warrant another methodology. ♦ Valuation theory can be elaborate. Valuation models are sometimes highly complex and sensitive. Seemingly minor changes in methodology and modeling can dramatically change the conclusions. ♦ Ensure legal instructions are appropriate. Hypothetical assumptions are appropriate and acceptable in some situations, but not all. Maintain an attorney-expert relationship that’s conducive to the free exchange of ideas, questions, and concerns, since it is common that neither the attorney or the appraiser will fully understand initially the impact of their instructions to the other. ♦ Ensure that appraisal terms match the definitions in law and to the layman. If not, care must be exercised to keep communications clear to all, especially to the judge and jury. Give the Valuation Experts Enough Time and Resources For example, it takes 4 to 6 weeks to complete a “full analysis” appraisal on a single asset. Some require less, others a lot more. ♦ Remember that beyond the essential correct methodology, a valuation is dependent on market data, which takes time to collect when it must be gathered from third party sources. ♦ Also appraisers, if given the opportunity, can sometimes substantially increase their accuracy over that of nonlitigation appraisals by employing techniques that, due to their obscurity, complexity and/or cost, they are rarely asked to provide. These techniques should be considered early in the case for best results. Involve the Valuation Experts in Deposing and Crossing of the Opposition’s Experts and in Analyzing the Testimony of the Opposition’s Experts and in Analyzing the Opposition’s Valuation Strategy ♦ Recognize that most cases settle. Then employ the valuation experts in establishing the case’s probability of winning a valuation judgment or verdict and in setting appropriate settlement terms. ♦ Involve the appraiser in the search for, review of, and interpretation of valuation related documents. Research the Judge’s history on Valuation Issues Does the judge have experience with valuation issues? Does the judge dislike certain valuation techniques, such as the discounted cash flow or others?