What is a 'net analysis' and when should I request it?

"Single" and "Double" net analyses can help you more accurately understand the value of assets that could be realized in the event of a liquidation.

“Single Net” and “Double Net” analysis allow appraisers to provide clients with a general estimate of the liquidation expenses involved in the execution of a duress sale. These two types of analysis help the appraiser to paint a more specific picture for clients of what the true “value” of their assets may be. This stems from the fact that net analyses take into consideration the various costs associated with liquidation.

“Single Net” analysis (direct expenses) would be appropriate when a client wants a general idea of the specific costs directly associated with conducting a duress sale. These costs will include direct expenses and commissions for a sale. Direct expenses include advertising, labor, and travel. Presented in conjunction with an appraisal, these items will be a deduction from the gross value estimates expressed in the appraisal providing the client with what the estimated “net value” of a company’s assets will be in the instance a company must close its doors and sell its assets. This type of analysis does not include deductions for holding costs, legal fees, lease considerations, environmental considerations, removal issues or any other expenses not directly involved with conducting a sale of the assets.

“Double Net” analysis (holding costs) is a more detailed look at what it may cost a client to execute a duress sale. This type of analysis will include direct expenses and commissions for a sale, as well as the expected holding costs. The added element of holding costs is the main difference between a “Single” and a “Double” net analysis. Holding costs include labor, supplies, and utilities costs necessary to properly shut down the operations, personal property taxes and insurance, ongoing utility costs, building holding costs, including taxes, insurance, and maintenance. As with the “Single Net,” the “Double Net” expenses will be a deduction from the gross value estimates expressed in the appraisal. This type of analysis does not include deductions for legal fees, permits or other professional fees, lease payments for personal property, holding costs incurred after the auction is completed, real property that may not have sold or was abandoned, environmental considerations, and various other expenses not associated with the execution of a duress sale.