Equipment Appraisal Blog | Understanding Machinery Appraisals

One of the more specialized areas of equipment valuation involves aircraft. Whether it’s a fixed-wing, helicopter, private, or commercial plane, the need to obtain regular appraisals for aircraft is critical to the industry and the markets in which they trade. Here are a few reasons why, along with the key variables that go into an aircraft valuation.

Buying or selling an aircraft will almost certainly require a proper appraisal that ensures buyers do not overpay and sellers list their aircraft at a competitive yet fair price.

Financing and leasing are very common in the aircraft industry. Lenders use appraisals to ensure they are not underwriting more than a plane’s actual worth. Aircraft leasing is very popular and requires extensive knowledge of value, along with maintenance requirements, remaining useful life, and residual value.

Insurers will require a current appraisal that assists in setting appropriate coverage levels and determines reasonable and accurate payout amounts in the event of a loss. Aircraft appraisals are also essential for tax and accounting purposes, estate planning, and litigation involving asset division.

Accredited equipment appraisers need to understand the intricacies of valuing aircraft. Although the methodologies involved remain consistent with other machinery types, there are specific requirements to consider that will greatly impact the value of these assets.

The appraiser should engage with a knowledgeable aircraft inspection service or have access to recent reports regarding the aircraft’s exterior, interior, avionics, engine condition & hours, as well as overall maintenance history.

Understanding how to review maintenance records requires special experience and knowledge that industry experts have, as well as those involved with the day-to-day operation of the aircraft being valued. Examining logbooks, service bulletins, airworthiness directives, and compliance with regulatory requirements are all important to understand.

Once this is completed, the appraiser can conduct an independent market analysis while considering current trends, availability of similar aircraft, and recent sales data to determine the aircraft’s fair market value. They should also include cost approach variables such as effective age, depreciation, and remaining useful life.

Factors such as engine hours, avionics upgrades, and modifications should be taken into account to adjust the value accordingly.

When selecting an appraiser, it is essential to choose one who is certified by reputable organizations such as the Professional Aircraft Appraisal Organization (PAAO) or the American Society of Appraisers (ASA). Whether you are a buyer, seller, financial institution, or anyone else involved in the industry, having a current aircraft appraisal can help protect your investment and lead to well-informed decisions.

The marine industry has somewhat unique traits when it comes to the vessels operating within it. Like aircraft, both commercial and personal vessels have strict regulations regarding keeping them seaworthy and, in turn, marketable. Two distinct reports are often involved in this process: a certified marine survey and an accredited market valuation. While both involve evaluating a vessel, they serve different purposes and require distinct expertise.

Marine Surveys: A Deep Dive into Condition and Safety

A marine survey is a detailed inspection of a vessel’s specifications, condition, structure, and systems. A certified marine surveyor typically performs it and is an essential requirement for several reasons. The Coast Guard performs regular inspections and issues a Certificate of Inspection (COI) for working vessels. The minimum requirement is that a current survey be completed at least once every five years and, in many cases, more frequently.

If you are considering buying or selling a marine vessel, ask for the current survey and COI. A copy of the survey and COI is also required for securing property and liability insurance and obtaining bank financing.

In summary, surveyors inspect everything from the hull and electrical systems to the propulsion and safety equipment. The goal is to determine seaworthiness, identify necessary repairs, and ensure compliance with maritime regulations. The surveyor will generally not estimate value as part of the survey. If they are asked to provide an estimate, they should do so outside of the specific survey report, and their opinion of value may not be supportable for these purposes unless they are also accredited appraisers.

Marine Appraisals: Determining Market Value

A marine appraisal, on the other hand, is more focused on estimating a vessel’s monetary value. The valuation professional should have experience as an accredited or certified expert with credentials different from that of a surveyor. The American Society of Appraisers (ASA) is a reputable organization offering specialty training in marine valuation.

As part of the appraiser’s data requests, they will ask the owner for a current survey, which will assist them in better understanding the specifications and condition of the vessel. They will then complete their analysis relying on factors such as market demand, comparable sales, replacement cost new, chronological and effective age as well as average annual market depreciation.

Marine appraisals are commonly used for the same reasons as surveys, as well as for other purposes such as estate settlements, business disputes, divorce proceedings, tax, accounting, and financing decisions.

In short, get a survey if you need to know if a boat is safe and functional. If you need to determine its market worth, obtain an appraisal. Both services are crucial in their own right and can help vessel owners make informed decisions.