Equipment Appraisal Blog | Understanding Machinery Appraisals

What Areas are Considered in a Material Handling Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Nov 24, 2015 @ 10:00 AM


When you work with a machinery and equipment appraisal company, what will the equipment appraiser look at during the material handling equipment appraisal process? From the tread on the tires to the demand in the market, there are a wide number of factors that play into the final equipment values that are reported. Here are some of the areas that a machine appraiser looks at while conducting a material handling equipment auction:

Areas Considered in a Material Handling Equipment Appraisal

  • How old is the equipment? Though you might consider that to be a primary concern when you're having a machine appraisal performed, there are actually a lot of other factors that often weigh more heavily into the machinery appraisal than age. A machine only a couple years old that has ben abused or ill-maintained may command a much lower valuation than a ten-year-old machine that has been well maintained and has a variety of features that work well.
  • Is the equipment manufactured by a well known or unknown company? It's much easier for a repair to be made to a piece of material handling equipment that is from a major manufacturer with readily-available parts compared to an imported knock-off that requires speaking a second language to deal with their parts department or the chance that said parts will clear foreign customs. This is reflected in how much people are willing to pay for a piece of machinery.
  • What is the condition of the equipment in terms of maintenance and repair? If a machine hasn't been well cared for, it will have more problems in terms of repairs and a shorter lifespan, which is reflected in its appraisal value. Keeping a log of repairs and maintenance on each machine helps show that due diligence has been used in keeping the machinery in the best possible condition.
  • How does the equipment compares to similar equipment in terms of wear and abuse? Beyond simple repairs and maintenance, this speaks to whether dust or debris has gotten into the machinery, causing higher levels of wear than would normally be seen in a similar machine. Other signs may include scrapes, dents or sloppy repairs that may not hold up or compromises the machine's safety features..
  • What features does the equipment have? Much like an upgraded car, a piece of machinery that has good quality features that build value into the machine and helps save time, materials and effort will fetch a better price on the market, which is reflected in the final equipment valuation report you receive. A machine with only the basic features or poor-quality features that are broken or don't perform as planned will usually fetch a lower valuation.
  • What is the purpose of the appraisal? Appraisals can look at many different situations, from the sale of a company to the simple sale of assets during a bankruptcy. Knowing what the purpose is helps the appraiser understand what type of qualities need to be studied during the appraisal.

But this information doesn't apply only to having equipment appraisals performed, it can also be used when selecting equipment that is more likely to hold its value in the future. If you're still looking for equipment appraisers to provide a material handling equipment appraisal for your company, please contact us. Our appraisers are accredited through the American Society of Appraisers.

Tags: equipment appraiser, machine appraisal, material handling equipment appraisal

What exactly is involved in fixed asset appraisals?

Posted by Equipment Appraisal Services on Tue, Nov 17, 2015 @ 11:00 AM


When you're looking at machinery and equipment appraisal, the different approaches taken to determine machinery valuation can seem mind boggling at times. Your equipment appraiser will know best which type of appraisal fits your situation and your business' needs, but knowing a bit about common appraisal practices helps you better understand your equipment value and how it affects your business' bottom line. Let's take a look at what this type of appraisal can do for your business:

What are fixed asset appraisals?

Accounting practices such as depreciation will often lower the value of a piece of equipment on the books to zero long before the machinery ceases to provide value for the business. A fixed asset appraisal looks at the actual value of the machinery. Transactions that involve selling, buying or merging a business often require that equipment appraisals be performed that will provide an accurate picture of the business' financial condition. A business expansion that requires collateral for financing arrangements will often use a fixed asset appraisal to provide the same type of clarity. Having documentation of an asset's value from a qualified machine appraiser is often vital to insurance claims, especially if you'd rather get the claim done and get your business back into action instead of fighting with the insurance company over the value of equipment that has been lost. 

Make sure the equipment appraiser you use is from a firm that is an Accredited Member of the American Society of Appraisers with a designation in Machine & Technical Specialties to best protect your bottom line. Contact us today to speak with our highly qualified equipment appraisers and get a clear picture of where your business' finances stand.

Tags: machinery & equipment appraisal, fixed asset appraisal

What to Look for in a Manufacturing Equipment Appraisal

Posted by Equipment Appraisal Services on Thu, Nov 12, 2015 @ 10:30 AM


When you need an appraiser for a piece of manufacturing equipment, it is important that you hire the right equipment appraiser -- a person who is uniquely qualified to appraise the piece of equipment you have. Yet, how exactly do you go about finding the right person for your manufacturing equipment appraisal, especially if you have a tight deadline? Learn our tips for selecting a qualified equipment appraiser to pick the right person for your present need. 

Finding a Qualified Machine Appraiser: What to Look For

An appraiser performing equipment valuation can have a lasting impact on the value of your business assets, so it is vital that you pick the right person for the job. Here are several criteria we recommend using when selecting a manufacturing equipment appraiser

  • Certified - To protect yourself and get an accurate machinery valuation, look for an appraiser who is certified by one of the major industry associations, such as the American Society of Appraisers, and holds a specialty in machinery and technical equipment appraisals. Since appraisers come to the field from different backgrounds, they may have different work histories and educations. As long as they have a professional certification, they are independently certified to have the right experience for the job and you can hire them with confidence. 
  • Independent - In some cases, you may be getting a piece of equipment appraised to satisfy someone else. Perhaps your company is merging with another, or you are getting something appraised for insurance purposes. In these cases, there is another party who has a vested interest in the equipment's value and who could stand to benefit from a lower appraised value. For this reason, we recommend hiring an independent equipment appraiser instead of someone who has a tie to the parent company or insurance company. At Equipment Appraisal Services, we offer independent machinery appraisals to individuals and companies. 
  • Knowledgeable - Machine appraisers specialize in different niches and industries. One might be an expert in car manufacturing equipment, while another might be a scientific equipment appraiser, and another a farm machinery appraiser. You wouldn't take a tractor to an appraiser who regularly appraises scientific equipment; that individual would not have the degree of knowledge necessary to accurately value your equipment. Before you hire any appraiser, make sure they know your niche. 
  • Personable - Finally, you will need to discuss the appraisal with your appraiser so you understand the equipment value of your machinery and can act accordingly. For this reason, we recommend hiring an appraiser that you have a personal connection with, and who possesses all the criteria listed above. 
  • Fits Your Budget and Time Frame - In many cases, you have a time constraint and a budget for your machine appraisal. A qualified appraiser should be able to quote you a cost for the equipment appraisal and estimate a time frame of when they can complete the appraisal for you. To reduce your stress and ensure the best possible outcome, it is important to ensure that any appraiser will be able to meet both your budget and your time frame before you begin. 

Before you hire an appraiser to generate equipment values, ask them several questions either in person or over the phone to gain an understanding of their qualifications for your needs. Then hire someone with whom you feel comfortable and confident proceeding. Have you ever had to hire equipment appraisers? What criteria did you use to make your choice? 

Tags: equipment values, equipment appraiser, manufacturing equipment appraisal

Understanding Functional Obsolescence in Personal Property Assets

Posted by Equipment Appraisal Services on Mon, Nov 09, 2015 @ 03:30 PM


How can a piece of equipment be called functionally obsolete is if it something that you use every day? Learn about functional obsolescence in the machinery and equipment appraisal market to make the right decisions about your existing equipment. 

Understanding Functional Obsolescence

A machine appraiser may very well understand what this term means, but the average individual does not. Luckily, the concept is a fairly simple one to understand, even if you are not an equipment appraiser. 

The idea of functional obsolescence originally comes from real estate, although it has spread to other markets like the equipment appraisals market. An item can be said to be functionally obsolete if it is less useful or desirable than it was before. Anyone who has ever upgraded their iPhone to the latest model should understand this concept. 

An item that is obsolete usually has an outdated design feature that cannot easily be changed. In real estate, an example might be a one-bathroom house, when neighboring homes all have 2 baths. For personal property such as a car or truck, an outdated feature might be an early generation personal navigation system that is not as robust as present models of dashboard navigation. 

When there are like items on the market that have newer features and are more desirable, demand for the old item wanes as demand for the item item increases. As more people buy the new item, the value of the old one will continue to decline. 

This has a range of implications for the property owner. A store owner could get stuck with lots of old inventory if he or she invested heavily in an item that has been replaced by a newer model. A landlord could be forced to make costly repairs to an apartment if tenants did not want to rent the unit due to old, less desirable features. Or the items could be sold for reduced profit, with the decreased equipment value cutting into the business's bottom line. 

How to Determine Functional Obsolescence

While you may suspect that something is becoming obsolete, only a machine appraisal can confirm this lowered value for you in terms of real dollars. During the machinery valuation process, an appraiser will review the piece of equipment, compare it to similar inventory, note its condition, and look at other market factors that may effect the equipment or machinery valuation.

Let's say an appraiser was looking at a bottling line that was supposed to bottle 2 units per second. If the unit could not be operated at its full capacity due to external factors, or if the unit required a tune-up and could not operate efficiently, it would not be used at its full capacity and would thus take on a degree of obsolescence. A tune-up may restore the unit to peak operating condition; however, when obsolescence becomes so large, it may be more cost effective to replace the unit than repair it. 

A machine appraiser can examine the equipment and determine the presence of obsolescence. Lowered equipment values could mean a greater tax deduction for the business. Alternately, a lower value could help the company decide to sell the equipment and invest in better technology or realize that a tune-up will save money over purchasing a replacement bottling line. 

Equipment appraisers who specialize in the niche you serve are best qualified to gauge obsolescence. When it comes to valuing the equipment you use every day, trust the experts at Equipment Appraisal Services. 

Tags: appraisal depreciation, functional obsolescence

Why a Machinery & Equipment Appraisal after a Purchase is Necessary

Posted by Equipment Appraisal Services on Thu, Nov 05, 2015 @ 03:00 PM


If you have just purchased a large piece of equipment, then you may wonder why you would need to have a machinery valuation done. After all, wouldn't the equipment be worth the price you just paid for it? Not necessarily. Learn the benefits of having a machinery & equipment appraisal performed after a big purchase to ensure you make the most of your new asset. 

Why Have Equipment Appraisals After a Purchase? 

Top reasons to have a piece of equipment valued after a purchase include:

  • Reset fair market value - The business that sold the equipment to you probably did so at the point at which the piece of machinery had no book value to them. Perhaps they got a new excavator when their old one had fully depreciated on their books. Yet, you know that an asset like a used excavator still has a lot of life left in it. With an appraisal, you can reset the fair market value so that you can claim depreciation on the item. For your tax purposes, establishing equipment values is the first step toward being able to depreciate the item.
  • Insure the item - When it comes to something as large as an excavator, a machine appraisal is critical to protecting the item through insurance. If something were to happen to the excavator, would you have enough money to repair or replace it without affecting your profit and loss? If not, then you need the protection that insurance offers. An equipment appraiser can set the fair market value of an item so the insurer will cover it at its worth. 
  • Determine replacement cost - Ideally, your excavator will perform well for many years to come. Yet a smart business owner always covers themselves in case "the worst" does happen. By getting an equipment value from a machine appraiser, you can establish the cost to repair or replace equipment pieces as well as the whole machine. This allows you to make informed decisions about equipment repair and determine when the machine costs more to repair than it would to replace, saving the business money. 
  • Boost business value - It may seem strange that a machine appraisal can positively impact business value, but it is true. When you have all equipment appraised, including new-to-you used machinery, your business can have an overall higher value. This occurs in part because appraised value is higher than depreciated value. 

If you have purchased a large piece of equipment, or if you are planning on doing so in the near future, identify equipment appraisers who have expertise in your specific niche. This way, you can have them appraise the equipment so you can take the necessary steps to protect yourself once you move the new asset into business usage. 

When moving through the process of machinery appraisal, it is necessary that you work with an equipment appraiser who really understands what you do and how to value the piece of equipment that you use. This way, you end up with a fair market value for your large item that is accurate and fair. An inexperienced appraiser could guess at the value and accidentally lead you astray. 

If you would like to learn more about the equipment appraisal process for used machinery, or if you want to talk to an industry expert about valuing a piece of machinery, please contact us at Equipment Appraisal Services.

Tags: equipment appraisals, machinery & equipment appraisal

What is appraisal depreciation?

Posted by Equipment Appraisal Services on Mon, Nov 02, 2015 @ 01:30 PM


Most people are familiar with accounting depreciation.  But what about appraisal depreciation?

When performing a machinery valuation, an appraiser will do his or her best to determine the value of all pieces of equipment and machines utilized in business. As part of determining the present value of a particular item, an appraiser will review the depreciation of a given item. When you understand what appraisal depreciation is, you will better understand the information presented to you by the appraiser. 

What is the appraisal method of depreciation?

Hopefully, you are already familiar with the concept of depreciation. This refers to the amount of value that an item loses (or depreciates) in a time period. 

Let's say you drive a new truck off the lot and plan to use it for business. You just paid $39,999 for the truck. The minute you drive the truck off the lot, it begins to depreciate. 

After two years and 60,000 miles, let's say that you want to sell the truck. Since it has depreciated for 24 months, you could not sell it for the same amount you paid. If the truck depreciated $12,000, you could assume a sales price of $28,000.  In the case of a truck, a better option might be to look at comparable sales.  But what if you had a niche piece of equipment where there are not many comps?

An equipment appraiser has access to manuals that outline depreciation formulas for specific types of equipment.  Appraisers look at a number of factors when determining depreciation which may include physical deterioration, economic obsolescence and functional obsolescence.  Appraisers will look at the normal useful life of machinery and equipment, not the accounting depreciable life, since these are often not the same.  Appraisers also adjust for the replacement cost or reproduction cost new, where accounting depreciation takes the original cost in its calculation.

Why do appraisers take depreciation?

There are many reasons that a company owner might ask for a machine appraisal. Common scenarios to get equipment appraisals performed include:

  • When selling, auctioning, or trading in an asset
  • When donating an asset to charity
  • When preparing to sell the business
  • When getting insurance estimates
  • When declaring bankruptcy
  • When taking out a loan, financing, or refinancing your business
  • For accounting or tax purposes

Savvy business owners understand that they have a flawed idea of how much their business and their assets are worth on the open market. They attach sentimental or emotional value to equipment because they take pride in what they do. To get a "reality check" on an item's value, business owners contact an appraiser who works with other companies in their niche. Appraisers specialize just like other business professionals do, and you wouldn't contact a real estate appraiser for machinery valuation, would you?

When an appraiser estimates the depreciation of an item, they have insight into its value. By comparing the depreciation with current market demand for the item, the item's historical uniqueness, and other variables, the appraiser can set a fair dollar value for the item. 

Taken together, asset depreciation, independent research, and equipment analysis can help the appraiser accurately appraise a piece of equipment and your business as a whole.

Tags: Equipment Appraisal, Physical Deterioration, appraisal depreciation