Common use of CALCULATING THE FIRST OPTION PURCHASE PRICE Clause in Contracts

CALCULATING THE FIRST OPTION PURCHASE PRICE. The formula for determining the First Option Purchase Price is the cost to construct the buildings and other improvements, given material costs and labor costs in the current local economy, adjusted for deterioration, obsolescence and damage. The “adjustment for deterioration, obsolescence and damage” is calculated by subtracting the value of the current building state from the value of new building costs. For example, if a new 20-year roof costs $10,000 and the actual roof is ten years old, the adjustment to the value of the roof is 50%. This formula is intended to remove the market price of the land from any calculation of sale price. For the purposes of determining this value the Lessee shall appoint a licensed or certified appraiser with at least two years of experience. The cost of this appraiser will be borne by the Lessee. The appraiser shall be required to use the Lessor’s current Appraisal Form to ensure all appraisals of the buildings/improvements are based on the same format and comparable. A copy of the appraiser’s completed and signed Appraisal Form shall be included with the Seller Letter when sent to the Lessor. The Lessor may then exercise the First Option to Purchase at the offer price in the Seller Letter. Or at its sole discretion, and upon written notice to the Lessee, shall engage two additional licensed or certified appraisers using the same Appraisal Form. Copies of the two additional appraisals shall be provided to the Lessee. If the three appraisals are within 10% of each other, they shall be averaged. If they are not within 10% of each other, a meeting or telephone conference with all three appraisers will be held to enable them to consult with each other and arrive at an agreed price. The Lessee shall accept a sale price that is the average of all three appraisals or the price established by the three appraisers in consultation with each other. If the three appraisers cannot agree to a price, two additional licensed or certified appraisers will be hired. Of the five appraisals, the highest appraisal and the lowest appraisal will be discarded and the middle three will be averaged to arrive at a sale price. The Lessee shall accept this sale price. If more than one appraisal is required to arrive at a sale price, the Lessor and the Lessee will share the cost of the appraisals equally.