Equipment Appraisal Blog | Understanding Machinery Appraisals

Considering Leasing? Find Out How an Equipment Appraisal Can Help

Posted by Equipment Appraisal Services on Tue, May 31, 2016 @ 11:00 AM


When you're running a business, there are a lot of financial decisions to make on a daily basis. When you need to get equipment, whether as a start up or an established company that's replacing existing equipment or expanding, one of those decisions is whether you are purchasing or leasing the equipment in question. How do you know if you're making a good deal? Here are some tips to consider.

Considering Leasing? Find Out How an Equipment Appraisal Can Help

Lease vs. Buy

First off, let's take a quick look at the advantages and disadvantages of each type of acquisition. When you lease equipment, you're paying to use it for a set period of time. There may be some restrictions in terms of how you can use the equipment, as the leasing company expects to get back a machine with a certain amount of equity at the end of the lease. A lease also prevents you from building equity in the asset as you pay it down, because you're only paying for the privilege of using it. But at the same time, you typically don't have to worry about breakdowns or heavy repair bills, because that's covered under the terms of your lease. The advantage of leasing is that you typically pay a lower price for equipment you may not want to keep in the future, which is very helpful if your business is expanding.

By comparison, buying equipment means that you're responsible for repairs not covered by the warranty, but you're purchasing the equipment. Every payment you make increases the amount of equity you have in that asset. At the end of the payment schedule, you can choose whether you're going to retain that piece of equipment and invest the payment money into another area of your business or if you're going to sell it and have some additional financial assets available for an upgrade or different investment. Your only restrictions on use may be legal limitations of negligence, or intentionally using the equipment in an unsafe manner. Though buying typically has a higher payment, you gain equity and increase your business' assets.

Where Equipment Appraisal Comes Into Play

But how can an equipment appraisal affect your decision? If you're getting ready to enter into a financial agreement of any kind, you'd want to know you're getting your money's worth. In the end, whether you buy or lease, you want to make sure you're paying a fair amount. That means that having an equipment appraisal performed protects your investment. If you're leasing a piece of equipment, a machine appraisal lets you know whether the lease payments are too high. If you're purchasing that same piece of equipment, the machinery valuation helps you negotiate a fair price for the equipment. You wouldn't pay $30,000 for a 2000 Geo Metro with 200,000 miles on it. but it's easier to know the value of a vehicle than it is machinery that has a much more limited market. Having a certified equipment appraiser provide you with a machinery valuation gives you the knowledge you need to negotiate a good price.

By taking a machine appraisal into account when you're acquiring equipment for your company, you can ensure that you're getting a fair deal whether you're buying or leasing.

Tags: equipment leasing, lease buy out, fair market value

What's considered in a packaging equipment appraisal?

Posted by Equipment Appraisal Services on Tue, May 24, 2016 @ 11:30 AM


When you're considering having a packaging equipment appraisal completed for your business, you may not know what kind aspects of the equipment comes into play and what importance it has on the final machinery valuation. Is a dent in a machine or a worn part going to raise serious concerns with your equipment appraiser? In this piece, we'll discuss what the most common aspects are considered during a packaging equipment appraisal.

What aspects are considered in a packaging equipment appraisal

  • The age of the equipment: Though you might think this would be the first place you may lose or gain value, it's not actually as important as you may think. Industrial packaging equipment can retain its value over many years and is designed for long duty cycles over the years. That means that it won't lose value as quickly when compared to consumer-grade equipment and may have a higher value than what you would expect.

  • The condition of the equipment: The equipment's condition can actually play a much more important role in the final equipment valuation, including several areas discussed below. Machinery that has been well maintained and has versatile configuration possibilities has the best chance of retaining its value. You may want to consider doing touch-up painting, removing dents or repairing cosmetic issues prior to selling equipment, but these types of issues often don't affect the final value nearly as much as the machine's internal condition, unless they show signs of abuse or poor care.

  • Any needed repairs: Before you have a packaging equipment appraisal performed, you may want to make sure that any needed repairs are made. You'll also want to make sure that machinery that has had needed repairs put off has a good inspection performed at the time of the repair. During this inspection, the service technician can report on any related systems that have been affected due to the delay in service and can ensure all the related components that have been damaged due to the delay are repaired. This helps bring the equipment back to its best operating condition.

  • Regular maintenance records: Having regular maintenance performed on your machinery helps extend its lifespan and value, but you need to be able to prove that the maintenance has been performed. Though a regular maintenance log is the easiest way to provide this documentation, you can also use service records from outside shops, or receipts for work performed or parts and supplies purchased for maintenance tasks.

  • Excessive wear and tear or other signs of abuse: If a piece of machinery shows signs of excessive wear and tear, abuse, bends, dents, cracks or poorly-made repairs, it will lose value. Machinery that has been abused will not perform well, may be unsafe or can fail much earlier than comparable equipment that has been well maintained.

  • Current market conditions: Is your industry currently in a boom or bust cycle? Though many kinds of packaging equipment can be retrofitted for other industries, the current market conditions in your industry can affect the valuation of your machinery, especially if the machinery is specific to that industry.

By knowing what will be looked at in a packaging equipment appraisal, it becomes much easier to judge how well or poorly your equipment values may end up. When you look at these particular aspects and keep them in mind, you can maximize your equipment values.

Tags: packaging equipment appraisal

Personal Property Taxes: How an Equipment Appraisal Helps You Fight an Inaccurate Assessment

Posted by Equipment Appraisal Services on Tue, May 17, 2016 @ 11:00 AM


In both our business and personal lives, we expect to have to deal with unpleasant things on occasion. Paying taxes is a task nobody wants to undertake. But when you receive personal property taxes based on an assessment that is much too high, you may wonder if there's any point in fighting the system. Fortunately, many business owners find that having a machinery valuation helps when appealing your personal property tax assessment. Here are a few reasons why you may have received a high assessment and how getting equipment appraisals can help.

Personal Property Taxes: How an Equipment Appraisal Helps You Fight an Inaccurate Assessment

How your property taxes are determined

Your local tax assessor knows a lot about property values in your area, but typically on a very broad basis. The same assessor that's responsible for assessing your personal property tax on your equipment also estimates value on your neighbor's classic '65 Mustang, the local farmer's replacement cows for their operation and your uncle's latest RV purchase. Though they use some tools, such as value estimating software, there's no replacement for experience in a specific area when it comes to determining the value of your equipment, and an assessor who is overseeing a wide range of property can make mistakes.

Where mistakes can be made on your assessment

So where exactly can these mistakes be made on your assessment? One common mistake is basing the value only on the machine's original purchase price depreciated over a set number of years. We all have equipment in our operations that is still being actively used, even when it's been fully depreciated. We've also had equipment that wears out much more quickly than the standard depreciation table, so your relatively new cabinet saw is assessed at a much higher value than what it would actually bring on the free market. Another area where mistakes are made happens when the assessor uses the wrong model or year to determine the value. If you have a base model that was from an overseas market when the manufacturer was trying to broaden their market share, the assessor could be valuing it based on the domestically-produced version with all the bells and whistles.

How having an equipment appraisal can help

If you've had an inaccurate assessment made on your equipment, having a machinery appraisal is a great way to set the record straight. When you work with a certified equipment appraiser, their appraisal report bears weight. A certified appraiser has had training in the appraisal process and methodology, using standardized approaches and techniques to determine the proper value for the machine in question. If you end up having to fight the assessment in court, a certified machine appraiser's report provides a legal basis for the revised value. Many local assessors, when faced with a professionally prepared appraisal report from a certified machinery appraiser, will consider revising their assessment to match the report.

Receiving a high assessment on your personal property taxes can be a pain, but having a certified machinery valuation helps you fight an inaccurate assessment in an appeal. If you don't know what your equipment values are and need help determining an accurate value, please feel free to contact us today to be put in contact with an experienced certified equipment appraiser.

Tags: property tax, personal property tax

What's involved in becoming an ASA accredited machinery & equipment appraiser?

Posted by Equipment Appraisal Services on Tue, May 10, 2016 @ 10:30 AM


When you're looking at having equipment appraisals performed, you may hear about a specialist who is an ASA accredited machinery & equipment appraiser. But what does that mean? What's involved in the process of becoming an accredited appraisal specialist? Let's take a look at how the process works:

Becoming an ASA accredited machinery & equipment appraiser

  1. Make sure you meet the prerequisites first. You need to have been a full-time appraiser for at least two years to become an Accredited Member (AM) or five years to become an Accredited Senior Appraiser. For this program, 2,000 hours is considered one full year of work, so you can still receive accreditation without working full-time. You'll also need a bachelor's degree or an equivalent as described in the accreditation guide.
  2. Become a member of the American Society of Appraisers. This requires the membership form to be completed and submitted with a professional resume or statement of qualifications, three letters of reference and fees for application, one year's membership and any journals.
  3. After the membership is approved, you'll have ten months to pass an ASA ethics exam and pass a 15-hour National Uniform Standards of Professional Appraisal Practice (USPAP).
  4. You'll also need to go through four classes specific to the machinery and equipment industry, specifically ME201, ME202, ME203 and ME204 which are collectively referred to as the Principles of Valuation (POV) courses. Passing is required to continue your application process. 
  5. After passing these courses, you'll need to assemble your final application package. It should include:
    • A current, valid USPAP certificate on file with the ASA.
    • A copy of a college diploma or transcript, or other evidence of education per the education equivalency in the accreditation guide.
    • A copy of your log of two or five years summarizing your appraisal experiences, depending on whether you're considering the AM or ASA designation. An equivalent amount of part-time work may be submitted.
    • A narrative appraisal report completed for a client within the past two years.
    • A signed appraisal report release form.
    • A signed affirmation statement.
    • The accreditation fee.
    • The completed application for accreditation.
  6. At this point, the package is sent along to a qualified member of the International Board of Examiners, who may take up to 40 days to review all the material provided. At this point in the process, you'll be notified every time your materials and application package is acted upon, helping you plan for the next steps. Once they have completed their evaluation, it is then sent on to a second member of the Board of Examiners who may take an additional 40 days to review the material. This phase of the process can last up to three months, once mailing time and review time is factored into the calculations.
  7. A decision is rendered by the International Board of Examiners regarding the quality of the application and ability of the individual applying to the program, including experience, education, exam scores and quality of appraisal reports. At that time, it is decided by the board whether the applicant receives accreditation or must resubmit the application package with all appropriate corrections or additions made.

As you can see, becoming an ASA accredited machinery & equipment appraiser is hard work, but they provide the best results for their clients. If you need to have machinery valuation performed on your company's equipment, contact an ASA accredited machinery & equipment appraiser.

What happens during a used equipment appraisal?

Posted by Equipment Appraisal Services on Tue, May 03, 2016 @ 07:00 AM


If you've been following our blog for any length of time, you've come to realize the many benefits of machinery valuation. But what exactly happens during a used equipment appraisal and how does each step affect the final equipment values report that is generated by the equipment appraiser? In this post, we'll show you what happens during the process and give you the inside track of what happens during equipment appraisals.

What happens during a used equipment appraisal?

  1. We get into contact to determine what your needs are during the machine appraisal. This includes not only the basics of the equipment and your industry, but also the reason behind the appraisal. If you're getting an appraisal to sell equipment, it may be a very different amount compared to a buyout of a company or liquidating an asset that has ceased to function, so we want to ensure your appraisal meets your company's needs. There are different levels of value such as Fair Market Value, Orderly Liquidation Value, and Forced Liquidation Value, as well as others.  We'll also determine the needed date of appraisal, as insurance companies sometimes request an appraisal for equipment that has already been lost which will require a retrospective report.
  2. We gather the details of the equipment and examine any related paperwork that gives us a better idea of the equipment's history. Why do we need details? Much like different options on a vehicle, different versions of the same model may have additional benefits or features that can boost its value. Paperwork is checked to see if the equipment has been well maintained and kept in good repair during its use. Keeping this type of paperwork accessible during this part of the process allows us to complete the appraisal more quickly.
  3. We take a good look at its condition. This is the point that we actually get into the nuts and bolts of the machine. We'll take into account the conditions it is kept in, as dusty or damp conditions can quickly impact its expected lifespan. If the machine shows signs of abuse or poor repair, that will be taken into account in the final report for the same reasoning, as will signs of exemplary maintenance and care. Having the machine accessible helps speed up this part of the process.
  4. The machinery appraiser prepares a valuation report for the equipment. Before you hire an appraiser, be sure that they are certified in equipment appraisal, as that helps ensure the final report is acceptable to insurance companies, financial institutions and the legal system. A machinery appraiser will take all the information provided and use it to determine the equipment's value for your purposes, including all the methodology used in determining that value, then write it up into a report for your purposes.
  5. Any discrepancies are addressed. If something was missed in the paperwork or a vital facet of the machinery was missed, a good appraisal company will have a process in place so that you can explain your rational for why something may not have been taken into account to ensured it accurately reflects the machinery's value. 

Now that you know what happens during a used equipment appraisal, you'll be better prepared for your next valuation. If you still have questions about how the appraisal process works or need to have an equipment appraisal performed by a highly-qualified equipment appraiser, please feel free to contact us. At Equipment Appraisal Services, our certified appraisers only work with industrial equipment, providing the expertise your business needs.