Are you in a Flood Zone…Possible good news on the horizon.

The United States Congress recently voted in favor of S. 3814, “The National Flood Insurance Program Reextension Act of 2010.” President Obama is expected to sign this legislation in the next few days. The law will extend the coverage of the National Flood Insurance Program from September 30, 2010 to September 30, 2011.

Since 2008, the National Flood Insurance Program has been operating under a series of short-term extensions. Congress already has allowed the program to lapse four times since the start of the year.

Published in: on September 24, 2010 at 10:57 am  Leave a Comment  

How can I incentize the Seller to accept my offer?

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Q. I want to make an offer on a home but the seller is concerned about my contract being subject to financing.  What kind of incentive can I give the seller so that he/she will take my offer?

A. You can provide a pre-approval letter to help him/her with his comfort level.  Another way to entice the seller would be to make your deposit non-refundable if you don’t close. In that case, he would be compensated for the time expended.  As always, see the advice of a professional before signing a contract.

As with any legal issue, the advice of a trained professional is always beneficial.  Our firm is a full service law firm covering such legal matters as personal injury and estate planning.  If we can assist you, please call or visit our website.

Published in: on September 13, 2010 at 3:50 pm  Leave a Comment  

I am selling my property, what is a transfer tax and what will it cost me.

The Real Estate Transfer Tax is a tax on the sale, granting, and transfer of real property or an interest in real property.  The statute imposing the tax is found at RSA chapter 78-B and the Department’s administrative rules are at N.H. Code of Admin. Rules, Rev 800.  The tax is imposed on both the buyer and the seller at the rate of $.75 per $100 of the price or consideration for the sale, granting, or transfer.

What types of transactions are taxable? All contractual transfers are subject to tax unless specifically exempt under RSA 78-B:2.  Examples of contractual transfers include:

  • Sales of land and buildings.
  • Transfers between a business entity and its owners.
  • Transfers between related business entities.
  • Transfers from the state of NH, a county, municipality, or other political subdivision of the state. In such circumstances the tax applies only to the buyer.
  • Transfers with the U.S. government or with any of its agencies, instrumentalities or any government corporation that is specifically exempt from state tax per federal law. In such circumstances, the tax only applies to the counterparty, and not to the U.S. government.
  • Sale or granting of a right-of-way or an easement on property.
  • Transfers through foreclosure or by deed in lieu of foreclosure.
  • Leases of real estate for 99 years or longer, inclusive of renewal rights whether exercised or not.
  • Transfers through deed issued as a result of a sheriff’s sale.
  • Transfers of standing timber or exclusive rights to extract soil, gravel, minerals or other like materials from the land of another.
  • Transfers of interests in time-share properties.
  • Transfers of interests in real estate holding companies.
  • IRC § 1031 like-kind exchanges and other real estate for real estate swaps.

On what is the tax based? For most arms length transactions, the tax is based on the actual price or consideration agreed to by the parties.

  • For transactions in which the consideration paid is $4,000 or less, the minimum tax is due ($20 from the buyer and $20 from the seller).
  • For transactions between related parties in which the consideration stated is unsupported, the tax will be assessed on the fair market value of the property.
  • For exchanges involving property or services, the tax is based on fair market value.
  • For transfers of interests in holding companies, the tax is based on the fair market value of the interest attributable to New Hampshire real estate.

What is fair market value? Fair market value is the price the property would command in an arm’s length transaction between a willing buyer and a willing seller.

What are related parties? The term “related parties” encompasses individuals related by blood or law, individuals and the entities they own, and interrelated entities.

What is a real estate holding company? A real estate holding company is a business organization, which is engaged principally in the business of owning, holding, selling, or leasing real estate and which owns real estate or an interest in real estate within the state.

Are there exceptions to the Real Estate Transfer Tax? Yes, among the exceptions are:

  • Non-contractual transfers.
  • Transfers between spouses pursuant to a final decree of divorce or nullity.
  • Filing of a deed or other instrument that correct a deed.
  • Transfers to the state of NH, or a county, a municipality, or other political subdivision of the state of NH.
  • Transfers of cemetery plots.
  • Transfers that occur by devise, by intestate succession and descent, or by the death of a joint tenant.

In the State of New Hampshire there is a transfer tax that gets paid at the time of recording the deed at the county registry of deeds.  The fee is based on the sales price of the property and is equal to $15.00 dollars per $1,000.00 dollars of the that figure.  By statute this amount is to be split by the Buyer and Seller unless negotiated differently in the Purchase and Sales Agreement.

There are time when a transfer tax does not have to be paid.  They include.

Published in: on September 3, 2010 at 12:10 pm  Leave a Comment  

Looking to sell your business…How can you find out what it is worth? Check this out!

Valuation is the number one question of all of our sellers when contemplating a sale, and of course, the concern of most buyers when purchasing a business.

Unfortunately there is not an easy answer, and more confusing there are probably several answers. Why?

  • Because business valuation is an art not a science
    Valuations are subject to the appraisers judgment, skill and quality of methodology. There are several standards of value for businesses (ie different values!).
  • Fair market value – The price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts.
  • Intrinsic value – Stock values that investors would consider.
  • Fair value – Legal standards to value. Often used in divorce.
  • Investment value or strategic value – The value to specific buyers. Could exceed fair market value.

But for our purposes let’s talk about fair market value. Essentially what a buyer would pay for your business in an open market.

Now, remember, this is a simplification of some very intricate valuation practices. There are valuation experts that specialize in providing very complicated reports. Those reports are often used for IRS inquiries, legal proceedings, intricate financing and other reasons. A full valuation of a business could cost ten to thirty thousand dollars. For small business sales, a valuation is usually not needed, and for the most part our simplified valuation methods are sufficient enough to determine your listing and approximate your eventual sale price.

There are three generally accepted approaches to valuing a business.

  • 1. The asset approach
  • 2. The market approach
  • 3. The income approach.

Asset Approach – values the assets of your business minus the liabilities. Some of the methods in this approach are book value, excess earnings method, asset accumulation method to name a few. However these values usually mean very little to the market value of most operating businesses. For the most part the asset approach does not properly represent the value of an ongoing business that has positive earnings.

Market Approach – Simply defined, it is much like a real estate comparable method. Like businesses in size and industry sell for similar valuations. There is the guideline publicly traded company method or the merger and acquired company method (private sale databases). There are many databases we can research to find multiples of gross sales and earnings to compare to your business. This method can be very reliable in most cases and is a strong indicator of value.

Income Approach – Your business is worth the present value of the income stream it will bring to an investor. There are several complicated methods including the discounted future earnings method as well as several capitalization methods. This approach is also a strong indicator of what a business with positive income is worth. These methods rely on future projections and growth rates to decide what the business may be worth. If that is true then why do most people multiply or capitalize historical earnings to arrive at a value? Because the assumption is the buyer will maintain the current income levels and they are a reasonable indication of future earnings.

Whew? What does all that mean? Simple. Your business is worth a multiple of your past earnings if a buyer can project those earnings will be maintained after the purchase.

What is the multiple? Well first we must discuss what you want to multiply? Net income? EBITDA? Owner’s benefit? In small business sales (businesses earning less than 1 million dollars), we use owner’s benefit. Owner’s benefit equals the net income, plus depreciation, interest, and the owner’s salary and fringe benefits. In other words, all the income available to ONE owner if the company was debt free. EBITDA is used by larger businesses and includes normalized salary and benefit package for an executive to operate your business.

OK now the multiples. Well the multiples of owner benefit can run from less than one to about three. If you business is larger and your EBITDA is near or above one million, the multiples can run from four to six. Is this set in stone? NO! How do you know which multiple would be used for your business? Well, the multiple will rise along with the size, quality, and verifiability of your owners benefit. Bad books, dim future, negative growth and little profits equal a low multiple. Excellent books, bright future, excellent growth you will garner a high multiple.

Can all that mean nothing. Yes!
Buyers determine a businesses eventual sale price. Not valuation experts. That is why no one can tell you exactly what your business is worth. Not your banker, CPA, lawyer, broker, or mother-in-law. The only individual that will tell you what it is worth is the eventual buyer – and that will be a subjective evaluation. The same business will be valued differently by every buyer.

Lost yet? Here’s a summary. Your business is worth the following:

  • 1. A multiple of earnings compared to like businesses (gross sales or owners benefit times an industry multiple).
  • 2. A capitalization of the net profit (NOT OWNERS BENEFIT…you cannot capitalize owners benefit!) 20% to 50% or a simple multiple of owner benefit.
  • 3. And if your business makes little or no money- Asset value is the only value. (Goodwill + inventory + equipment +etc.) Either sold as a whole or liquidated over time.

For more information check out

Published in: on September 1, 2010 at 7:51 am  Leave a Comment