Equipment Appraisal Blog | Understanding Machinery Appraisals

If you own a business looking to dispose of excess used equipment, or personally own property you no longer need, your first thought may be to resell it in the open market. This can be a difficult process with no guarantee of the price you will receive. Another effective option to consider is donating the assets to a local non-profit, such as a public school/university, hospital, research institute, charity, museum, or other tax-exempt organization.

Research options locally, or contact your high school and university to see if they would be interested in acquiring the used equipment for their educational programs, or refer you to a facility they know would be interested.

The benefits of this type of disposition are many. You have the obvious tax deduction, which offsets your income. You may also be accruing goodwill by helping the organization you’re donating to, as well as the individuals they support, by providing useful equipment they might not otherwise be able to afford. Scientific, medical, and technical research and educational institutions need resources to maintain and grow their foundations.

Before making the donation, make sure you check that the equipment is in good working order and clean it if necessary. Then create an itemized list of what you will be providing to the non-profit organization. This list will be very useful when filing your taxes and for valuing purposes.

If you are fairly certain the overall value of your donated machinery will exceed $5,000, you will need to obtain an appraisal to support the higher claim. The advantage of a donation appraisal is that the price level will be measured at fair market value, which is higher than any trade-in or liquidation price you would receive from potential buyers if you tried to sell on your own.

Look to engage with an experienced, accredited appraiser who is familiar with the type of assets you are donating. Equipment donation valuations are common, and the appraiser can provide the support needed to ensure you receive a reasonable and supportable value assessment.

Once the appraisal report is delivered, you will need to complete IRS Form 8283 for non-cash donations and have the appraiser review and attest to the reported value. You can submit this as part of your overall tax return.

Donations can also be made for unused inventory, such as spare parts and tools. Companies that produce excess finished goods can also donate these items using the same process. Equipment appraisers with experience in valuing inventory can work with you on these types of donations as well. In summary, before you decide to resell your excess used machinery, consider a donation as a more effective alternative.

When it comes to independent valuation work, an objective opinion should have a certain degree of subjective common sense in an appraiser’s analysis and conclusions. Without it, they might be shortsighted, taking everything they see at face value without relying on their own experience to properly sift through the compilation of data and determine a realistic conclusion. This is especially true with machinery and equipment appraisers, as multiple sources about the same topic can be considered and relied upon, the sum of which will likely show a broad range of information.

There is no question that experienced appraisers with certifications and accreditations must show no bias or undue influence toward their clients and the overall scope of work. This is the fundamental foundation of the valuation industry and cannot be argued against.

That being said, an appraisal is an estimated opinion of value, and opinions are inherently subjective, regardless of the number of sources and documented information on which it is based. This is where the appraiser's experience becomes critical to the reliability of the value assessment.

The source material an appraiser researches, reviews, and relies upon will likely have gaps, flaws, inconsistencies, and broad ranges tied to the data, which they must make sense of and determine how best to correlate the information into a final conclusion.

Depending on the market activity of any given asset, these data sources might be abundant, very limited, or somewhere in between. In every instance, each piece of information should be considered and weighed.

The appraiser's job is to identify consistent patterns and potential outliers to arrive at a reliable opinion. They should ask themselves questions such as: 1) Are the available listings consistent and reasonable? 2) Are the database sources full of holes from a lack of prior sales data? 3) Are the opinions from third parties biased based on who is providing them? 4) Do industry trends focus on the specific equipment being valued?

Coming up with a logical, thoughtful conclusion of value is the ultimate goal of an appraisal expert. Going through this process is what separates established valuation experts from the rest of the pack. As a result, a degree of subjectivity will always be a component of an appraisal, regardless of the number of sources you rely upon. Consistently implementing this process across every valuation engagement is one of the most essential roles of a professional appraiser.