Equipment Appraisal Blog | Understanding Machinery Appraisals

We are often approached by clients who are trying to settle an insurance claim involving machinery and equipment, most frequently in the trucking and construction industries. The determination of an accurate value is critical, especially if the asset is determined to be "totaled" by the insurance company and the need to replace the equipment is immediate and mandatory. This is where the expertise of equipment appraisers becomes invaluable. Their role ensures fairness, transparency, and efficiency in the settlement process.

Insurance companies typically employ adjusters who have some experience valuing machinery and personal property. However, there is often a dispute between their determination of value and what the owner believes is a fair price. An accredited equipment appraiser with significant experience can enter the situation and provide a supportable analysis and detailed report that can be used to facilitate the settlement. Whether it is construction equipment, semi-trucks, trailers, manufacturing equipment, or any other tangible productive asset, an accredited appraiser will develop an unbiased assessment supported by the market and cost approaches to value.

An appraiser assesses the equipment's specifications, replacement cost, age, and market trends to determine fair market value. This helps policyholders receive appropriate compensation and can also assist insurance companies who may believe they are overpaying on a claim. The appraisal reports will serve as additional evidence during the claim settlement process, streamlining negotiations between insurers and policyholders.

In cases of disagreement over the equipment's worth, appraisers act as neutral experts. Their evaluations are often used in mediation or arbitration, helping to resolve disputes quickly and fairly. Valuing equipment requires an understanding of both the sales comparison approach and the cost approach to value. For example, more custom-built machinery or highly specialized machinery might not have clear market comparisons. An experienced appraiser can navigate these complexities and provide accurate assessments relying on both of these approaches and weighing the data accordingly.

In summary, equipment appraisers can play a pivotal role in insurance claim settlements. Their impartial evaluations ensure that both policyholders and insurers can reach fair agreements, minimizing disputes and delays. Engaging a qualified appraiser early in the claims process can save time, reduce stress, and lead to a more satisfactory outcome for all parties involved.

By blending their experience, education, and knowledge of the methodologies available to consider during a valuation, accredited equipment appraisers can be essential in ensuring smooth and equitable claim settlements.

Valuing marine vessels has certain unique variables to consider that are unlike other types of machinery and equipment. That being said, the approaches and methodologies to rely upon remain consistent with other tangible assets. Therefore, whether it's a supply boat, barge, towboat, fishing vessel, yacht, or container ship, if you are a generalist M&E appraiser, there's no reason to shy away from valuing ocean-going or inland waterway vessels.

To begin, factor in the purpose of the appraisal, which will assist in guiding the necessary criteria. Are you looking to support a resale effort, an acquisition, a determination of insurable value, or an assessment of the vessel's worth for financing or leasing purposes? Each objective may require a slightly different approach.

Once engaged, collect all relevant paperwork, including:

• Registration and Ownership Documents: Verify the vessel's legal status.
• Maintenance Records: A well-maintained boat retains more value.
• Inspection and Survey Reports: Essential for a comprehensive condition assessment.
• Recent Modifications and Upgrades: These can increase the vessel's value.

Reviewing the most recent survey/inspection report, along with reinvestments involved with rebuilds and/or upgrades, can assist in making necessary adjustments to value. Most generalist appraisers are not mechanics or technicians and can only independently adjust for these factors if they have third-party reports and invoices to reasonably verify the condition and work completed.

Focus on comments regarding the hull and structural integrity, mechanical systems (engines, propulsion, electrical), and interior and fixtures (cabin, navigation, and safety).

Develop an effective age for the vessel based on its original build date, annual usage, and major component rebuilds.

Research the current market value of similar vessels by considering the make and model, current specifications, and recent sales of new and used comparable vessels, along with economic data impacting the marine industry. Rely on both the market and cost approaches to value in an effort to balance the two perspectives and weigh them based on the level of comps available to consider.

In summary, as with other types of equipment, once you have the data in hand, use your experience and common sense to develop an analysis that factors in all relevant components to arrive at a reasonable estimate of value. I think you'll find that valuing marine vessels is a challenging but very interesting area of machinery and equipment appraisal work.