Goodwill

The Language of Real Estate

 

Goodwill

The expectation of continued public patronage.

An intangible, salable asset arising from the reputation of a business, including other intangible assets such as trade name and going-concern value.

It is the difference between the purchase price of a company and the fair market value of its net assets. Goodwill includes factors such as a company’s reputation, customer relationships, brand value, and other non-physical assets that contribute to an enterprise’s overall worth.

When a business is sold, the sales price often reflects its goodwill value.

Goodwill is not a depreciable asset, although it is a capital asset. Thus, a seller prefers to place a high value on the goodwill (and obtain a capital gain), while a buyer prefers a lower value (because goodwill cannot be depreciated).

If goodwill is considered in a market value appraisal, the appraiser should specifically identify it.

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