Equipment Appraisal Blog | Understanding Machinery Appraisals

How do you accurately determine used equipment values?

Posted by Equipment Appraisal Services on Tue, Sep 18, 2018 @ 02:13 PM

When you have used machinery, how do you figure out what it's worth? You have a few different options available, but only one really solid one. Used equipment values can vary widely, with a number of different sources, but how do you make sure that your equipment value is as accurate as possible? Here's a quick look at different ways you can have your equipment valued, along with the benefits and drawbacks of each method.

How do you accurately determine used equipment values?

So what are the different ways you can have your equipment valued? You could take a good look through online or live auctions, classified ads, magazines or similar markets to see if you could find the same or similar equipment. You could talk to your local dealer and find out how much they would give you for the equipment on trade. You could pay to an equipment appraiser to determine the value of your equipment. Though each of these approaches would give you a value for your equipment, only one of these would be accurate.

Equipment that is being offered for sale is priced based on how quickly the seller wants to move the equipment. If they're going for a quick sale, they may try to low ball the price or put on a fast paint job to hide years of abuse. If they're really not that enthused about trying to get rid of the equipment, they may price it high so that they're only getting rid of it for the price they want.

A dealer may offer you a price based on whether they need to sell new equipment or want to deal with the hassle of trading in used equipment. If they need to make a sale to improve their commissions for the month, they may offer you a much higher value than your equipment is really worth. If, on the other hand, they have a decent paycheck coming up and don't want to deal with the hassle of handling your used equipment, they may offer you significantly lower than it's actually worth.

Though you need to pay for an equipment appraisal, it actually provides you with the most value. An equipment appraiser deals with similar machinery every day can tell what kind of condition your machinery is in, and may even be able to recommend repairs to help improve the value. They take into account your industry's current condition, helping you determine whether you should sell your equipment outside of your region due to a localized slump. The valuation report they produce uses standardized methodologies to determine the value of your machinery, which means it will stand up well to very strong scrutiny if you're getting a loan or facing an insurance loss, incorrect tax assessment or a lawsuit.

Though there are a number of different ways you can calculate used equipment values, getting the accuracy you need for most purposes can only be found when you work with a certified equipment appraiser. Because of their level of training, expertise and experience, certified appraisers are able to calculate values and produce valuation reports that stand up well to the strongest of scrutiny, including legal, financial, insurance and tax agency circles. Working with a certified appraiser is the best way to ensure you're getting your money's worth out of your equipment valuation.

Tags: used equipment values

How to use an equipment appraisal for asset allocation

Posted by Equipment Appraisal Services on Tue, Sep 11, 2018 @ 09:44 AM

When you're buying a business or a large lot of equipment, it can be difficult to determine how to allocate value across the assets. How do you determine how much of the value you've paid for the equipment should go to each piece of machinery? One of the easiest ways to make this work is through an equipment appraisal for asset allocation, which uses the values from the appraisal report created by a certified equipment appraiser to determine the overall value and how it should be spread across a number of different pieces of machinery.

How to use an equipment appraisal for asset allocation

Let's take a look at a possible scenario that is fairly common when a large lot of mixed equipment is purchased. A business needs to expand quickly and so buys out a bunch of equipment from a competitor. Though the equipment is worth a particular amount as a lot, it's hard to determine the value of each type of equipment, never mind each piece. How do you divide the cost of all the equipment up among the different pieces of machinery in a fair, equitable fashion?

One of the easiest ways to determine how to allocate asset value is by having an equipment appraisal performed. When an overall valuation is performed, the valuation specialist looks at all the equipment you've purchased, which allows them to pick out differences between not only different types of machinery, but also individual pieces of equipment within that model. They can tell you when a particular piece of machinery has a lower value because it has damage or excessive wear. They're able to mention when a particular part of a lot has a higher value because it has an optional feature that wasn't included in the other machinery.

Once the appraiser has had the opportunity to review and examine all the machinery, they can create an overall report that sums up the total value as well as the individual value of each piece of machinery. A certified equipment appraiser used a series of standardized methodologies to calculate the exact value of the machinery. The certification process ensures that a certified appraiser has the knowledge, experience and expertise to determine the machinery's value accurately.

An equipment appraiser deals with nothing but machinery all day, allowing them to see how one piece of machinery compares to another. This gives them a unique insight to see every possible item that may affect its value, whether it's a stain from liquid that indicates a leak or drip, a bit of metal scraped free of paint that indicates a pulley out of alignment or a slightly different sheen to the paint that indicates repaired damage. Any of these signs can show you where any number of issues can come into play in the future use of your equipment, allowing you to make repairs as needed.

The process of allocating assets in your business can seem like a complicated process, but using an equipment appraisal for asset allocation provides you with a fair value for your equipment, making the process go much more easily. It also provides you with a background value for your machinery, providing you with a solid proof of value should you suffer any losses for your insurance company or need to prove the value of the machinery for legal, financial or tax purposes. 

Tags: appraisal for asset allocation

How Industrial Equipment Appraisals Protect Your Business From Natural Disasters

Posted by Equipment Appraisal Services on Wed, Sep 05, 2018 @ 11:46 AM

Natural disasters are getting more costly for businesses—and scientific studies suggest these disasters will only be more prevalent going forward, with this century forecast to see a 40 percent increase in tropical storms rated Category 3 to 5. The best way to protect your business assets from a natural disaster is to purchase sufficient business insurance—and this means getting your industrial equipment appraised. Find out how industrial equipment appraisals protect your valuable assets during a natural disaster. 

If you don't have insurance that covers your industrial equipment, you will be forced to pay for replacement equipment out of hand. Many businesses are forced into bankruptcy after a devastating event, such as a fire or flood, because they do not have the capital to replace the equipment they need to fulfill orders. Studies estimate that 40 percent of small business never reopen after a natural disaster. 

Before you can purchase insurance for your assets, you need to understand your risk. What types of natural disasters occur where you do business? Are there other incidents that are uncommon, but may happen? 

Consider that hurricanes typically affect coastal areas, but they don't always stick to the seaboard. While you may be at low risk of a hurricane, since these storms are relatively rare, it may make sense to buy hurricane protection because a single storm could wipe out your facility overnight. 

Next, determine your tolerance level for risk. Would you prefer to protect your business against all foreseeable hazards, or do you want to stick with coverage for the most common incidents that affect your area? 

Review your insurance coverage, paying special attention to policy exclusions. Insurance policies often exclude earthquakes for facilities that lie near fault lines. With hurricanes, some damage may be covered by business property insurance while other types of damage are excluded. For instance, policies treat hurricane rain differently when it's falling and on the ground. Once rain hits the ground, insurance companies consider it flood water, rather than part of the hurricane. They may then refuse to cover damage to your industrial equipment unless it was damaged before the rain hit the ground (for instance, if it came through a broken window). 

You may purchase supplementary insurance to cover these gaps or exclusions, safeguarding your assets and ensuring replacement in the event of disaster. 

To buy insurance, however, you need to know how much insurance you need—and that's where the industrial appraisal comes in. An industrial appraisal provides an accurate valuation for your equipment so you know exactly how much it would cost if you needed to replace, say, a hoist. 

There are different ways to value equipment. An appraiser might determine what it would cost to replace your industrial equipment by comparison shopping for used equipment of a similar make and model or by gauging the new replacement cost of a similar asset, then factoring in the indirect costs of ownership (e.g. maintenance, labor, and tax). 

Recent sales transactions shine a light on market value for a given item, so some appraisers take the market value by looking at recent sales databases or auction houses. 

Any method that delivers an accurate cost estimate of your critical equipment is acceptable. 

You never know when your area will be hit with fires, floods, or storms. To be safe, get all of your mission critical industrial equipment appraised as soon as it's convenient to get losses covered during the next natural disaster that affects your area. 


Tags: industrial appraisal

When to Consider Valuing Equipment for Divorce Purposes

Posted by Equipment Appraisal Services on Tue, Sep 04, 2018 @ 12:41 PM

In a divorce, spouses split marital assets. While you may think of this in reference to personal assets, it also refers to business assets. If you own a business, your spouse may be entitled to up to half of the business's worth. To determine this worth, equipment valuation for divorce purposes is essential. Here's what you can expect when getting business equipment valued in cases of divorce. 

Why Appraise Equipment Before a Divorce

During a divorce, you must split the marital assets with your soon to be ex spouse. While it may be easy enough to assess the value of your home or car, gauging the worth of your business assets is trickier. An appraiser can estimate the value of your business by comparing it to your closest competitors. Equipment valuation methods help an appraiser determine the fair market value of business equipment. From this valuation, a judge or mediator can determine how much money your spouse is entitled to, by law. 

Valuing equipment for divorce purposes is the easiest way to determine your spouse's allotment, but it also benefits you. You want lower appraisal values for equipment where your spouse will want higher values. An appraiser can fairly assess business equipment without favoring either side. 

Divorce cases often turn acrimonious as partners fight over division of property, child custody, and other matters. As these cases drag on, legal fees mount. So do stress and tension. By letting an appraiser determine the worth of your business and equipment, you can reduce your stress and save both time and money. 

What to Expect When Valuing Equipment for Divorce Purposes 

When you schedule an appraisal, a certified appraiser will come out to your business. They will inspect the premises and take photos or videos of your equipment. An appraiser might ask to see a maintenance log or note the make, model, and condition of your business assets. A skilled appraiser will be thorough in their inspection, taking even the small tools and furniture into account. 

The appraiser will then review this information, perform independent research, and deliver an equipment valuation which you can use for divorce purposes. 

You may use a single appraiser for divorce purposes or each party may retain their own appraiser. It depends on how amicable the divorce process is. 

It is essential that you hire a certified appraiser when taking equipment values for divorce, as an appraiser who is not certified is viewed as suspect by the court.

A dealer, auctioneer, or other party should be avoided for valuation as well, as they may not have an independent, unbiased opinion of equipment value. Consider that an auctioneer who lowballs your construction business assets -- reducing the amount of money you have to give your soon to be ex spouse -- may hope to make a tidy profit by buying the equipment off you for a song. 

Certified appraisers have experience conducting appraisals for legal purposes, and many have previous experience testifying under oath. If your appraiser has to take the stand, this comfort can make the difference between a valuation that stands up in court and one that crumbles under cross-examination. 

Start searching for a certified appraiser who understands your industry as soon as you know you will be getting divorced. This gives you time to identify the right person, who can value your equipment fairly and assist with the division of marital assets as required by law. 


Tags: Valuing Equipment for Divorce Purposes