Equipment Appraisal Blog | Understanding Machinery Appraisals

He said, She said: when it comes to a divorce, many of us know it can be very stressful. With all that is happening to determine your future, you probably are not considering the importance of an equipment appraisal. If there is a business associated with the split, however, you need to look at this option, as there may be significant value in the tangible assets of the jointly owned company. An independent valuation by an accredited or certified appraiser of the tangible assets for the business, whether it is a trucking company, construction contracting business, landscaping or any similar operation is vitally important. In addition, the report will be supportable in court and take away any biased information you may be receiving from the other side. Here is what else you need to know:

The appraiser will act as a neutral party, providing a fair value for your equipment. If your appraisal report is not prepared by an accredited or certified equipment appraiser, it will likely be contested or thrown out in court during proceedings. If you believe there is a likelihood that the litigation will evolve into court proceedings, you will also want the appraiser to have experience as an expert witness, testifying as to the credibility and accuracy of the valuation report.

The most common premise, or definition of value utilized for divorce proceedings is Fair Market Value, however you should check with your attorney to ensure this is appropriate in your case. There are liquidation values you may need to consider as well, that can be reviewed and discussed prior to the engagement. Both parties should agree to the appraisal, however, if this is not possible, the fact that you engaged an experienced appraiser on your own will carry a lot of weight in ultimately determining value.

Understanding all that is involved during a divorce, including the need for an accredited or certified equipment appraisal can ensure you are receiving the best settlement possible. You or your legal counsel can get in touch with one of our professionals at equipmentappraisal.com to discuss the details further and receive a free quote for our services.

In our last blog post, we discussed Fair Market Value and its translation in the resale marketplace. The example we used was the sale of a used vehicle (car, pickup, SUV). For this week’s post, we will discuss the two liquidation value premises using the same example.

As a refresher, here are the two premises of value and their ASA definitions:

Orderly Liquidation Value

Orderly Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.

Forced Liquidation Value

Forced Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.

Orderly Liquidation Value would roughly translate to a trade-in value at your local dealership with the assumption that you are going to purchase another vehicle with that same dealer. There is enough incentive for the dealer to offer you a decent price given the new business aspect and the dealer’s need to make a profit margin on their ultimate resale of that asset.

The overall value and demand in the market for that particular vehicle will help determine how big that spread is. You will typically see a range of 20-40% between Fair Market Value and Orderly Liquidation depending on those factors. If a dealer has an immediate buyer for a high priced vehicle you are trading in, then the differential will be in the lower end of the range. If it is an older, less valuable vehicle with no resale timeline determined by the dealer, you can expect less of a trade in value in relation to the retail price.

Forced Liquidation Value, by its very definition, translates to an auction level which is generally considered the lowest value of a vehicle given the immediate need or compulsion to sell the vehicle as quickly as possible. You are essentially sacrificing dollars for time in these instances. The only lower levels of value used in appraisals are salvage (parts) and scrap.

The auction resale marketplace is very active in certain industries such as automobiles, trucks, trailers construction and standard metal working equipment. As a result, the levels of resale tend to be somewhat higher than if you were to try to auction equipment in a more confined industry with a limited number of potential buyers.

In summary, these different premises of value will produce a broad range of figures when considering all three in an appraisal assignment. Which ones are most appropriate for your business can be reviewed and discussed with an accredited appraiser prior to the actual valuation.

An ASA accredited equipment appraiser most often uses one or a combination of the following premises of value in their reports:

• Fair Market Value
• Orderly Liquidation Value
• Forced Liquidation Value

These terms are formally defined by the American Society of Appraisers (ASA) as follows:

Fair Market Value

Fair Market Value is an opinion expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date.

Orderly Liquidation Value

Orderly Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.

Forced Liquidation Value

Forced Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.

We are often asked how these definitions translate to the actual marketplace where the buying and selling occurs every day. To facilitate a response to this question, we will consider selling your used vehicle (car, pickup SUV) when it is determined you need to replace it. We will begin with the Fair Market Value premise.

Fair Market Value is considered the higher end of the value spectrum and can be considered comparable to a private party sale where you, as the owner of the vehicle, put an ad online or in a local paper in an attempt to sell to another private party. The key assumption here is that there is no immediate sense of having to sell or purchase and the sale is on an “as-is where is” basis with no warranty or other conditions of sale.

The ability to obtain Fair Market Value is more realistic if you are in the business of buying, selling, leasing or operating equipment in the applicable industry. That is why new and used equipment dealers will typically be a good source to best understand this “retail” level of value.

To summarize, fair market value while being an accepted level of pricing in an equipment resale effort, many businesses such as banks and other investors look to liquidation values as a more attainable figure in a typical resale scenario.

In our next blog post we will cover the two types of liquidation values as they relate to the sale of your used vehicle.

The value of precious metals has often reaped the benefits within unstable currency markets. Given the state of the current US economy in these uncertain times, many precious metals are trending upward in 2020. Gold and silver mining facilities are the most common, however, this industry includes other types of mines such as rhodium, palladium and platinum, which drive the precious metals markets on a day to day basis.

For businesses owners involved in the mining of these metals who may be considering selling in a strong market or expanding their capabilities by raising new capital, it is important to consider a current appraisal of the machinery & equipment working every day to keep your company operational.

An accredited ASA (American Society of Appraisers) appraiser will provide a detailed valuation of your tangible mining assets, including drills, high wall miners, draglines, shovels/excavators, loaders, haul trucks and any other support items involved in the day to day running of the operation.

At Equipment Appraisal Services we can complete an on-site visual inspection of the equipment or a “desktop” valuation based the descriptions and photographs you provide directly to us. We will thoroughly research the market and complete a detailed valuation to assist you when making important business or investment decisions.Our experienced, accredited appraisers have been completing these types of fully researched valuations for decades and can meet the demands of any machinery & equipment appraisal assignment across all markets & industries.

The restaurant industry has certainly been one of the top business segments to suffer during the COVID-19 pandemic over the last six months, with indoor dining options still not allowed in certain locations and most others facing limited capacity with stringent and costly guidelines to adhere to.

If you are a restaurant owner thinking of selling or are considering investing in one knowing the market will eventually open up again, you will need to make a sound decision armed with as much ammunition as possible. Part of your arsenal should include a current market appraisal of the furniture, fixtures and equipment, commonly referred to as FF&E.

An accredited ASA (American Society of Appraisers) appraiser will provide a detailed valuation including the kitchen equipment, bar and seating area assets and any other supporting tangible items involved in the day to day running of the restaurant. An appraisal can be completed as an on-site visual inspection of the equipment or as a “desktop” valuation based on the descriptions and photographs you provide to the appraiser.

Whichever direction you’re heading, Equipment Appraisal Services can assist you in the process and provide an independent opinion of value which can help form a realistic purchase or sale price for the business, and support the information needed to potential investors, financial institutions, insurance companies and other parties involved in the project. Our experienced, accredited appraisers have been completing these types of fully researched valuations for decades and have the depth of knowledge and experience to meet the demand of today's challenging market.