Equipment Appraisal Blog | Understanding Machinery Appraisals

When you need to have your equipment valued, what do you need to look for in an equipment appraisal firm? If you're not sure, you're not alone. A lot of companies and individuals who want to have their equipment valued don't know what to look for in an appraisal firm. Here's a quick look at some of the traits you should look for before hiring a machinery appraisal firm to document your equipment values.

What should you look for in a high-quality equipment appraisal firm?

At first glance, it can seem as though you already have a wide number of resources available to determine the value of your equipment. You can find similar equipment for sale in a sales flier and base your equipment values off of that value. You could go down to your local equipment dealer and ask for an estimate on trade-in value for your machinery. You could go to a few auctions and see what similar equipment sells for to get a better idea of what the market will bear. These will give you values for your equipment.

However, they're not going to give you an accurate value for your machinery.

When you hire a company to appraise your equipment, you're not trying to get someone's pie-in-the-sky figure that they'll hope they can get for your equipment. Your equipment value shouldn't be based on whether your equipment dealer is trying to convince you that the equipment you have is worthless or if they're willing to give you more than your equipment is worth to push one more sale for the quarter. Your equipment isn't being sold as a last option to raise a little cash, unlike the machinery you'll see at auction.

When you're getting ready to have your equipment appraised, you'll want to look for a certified equipment appraiser who has experience in your industry. Why this particular combination? 

A certified equipment appraiser has gone through a lot of education and experience to become certified. They've learned a great deal, not only about the machinery that they are appraising, but also about the practice of appraisal. They are able to determine exactly which type of value needs to be calculated for your specific situation, whether you need to sell equipment quickly due to a death or disability of the equipment owner, wait for the right price from the right buyer or just record the equipment's value for insurance, donation, tax or other purposes.

An appraiser who has experience in your industry not only deals with equipment on a daily basis, but deals with equipment that is specifically like yours on a daily basis. This gives them a level of familiarity with what your machinery is, how it operates and what to look for in terms of performance, expected useful lifespan and wear. With this knowledge, they can make a solid calculation of your equipment's value.

By hiring a good equipment appraisal firm, you can be assured that the machinery values you're provided with are accurate. You'll know that value will hold up well against strong scrutiny in a wide range of situations. Those values will give you a solid background for your accounting books and a good place to negotiate from when selling that machinery. When you hire a quality valuation company, the benefits you receive will last for years to come.

Most people have come to expect the arrival of their personal property tax bill every year. But every year, there's always a few who get an unpleasant surprise. Sticker shock is rough enough, but when it's on your property tax assessment, it can be even more alarming. Fortunately, you do have alternatives to paying a too-high assessment. Here's a quick overview of what you should expect when you go through a personal property tax appeal.

What Do You Need to Know for a Personal Property Tax Appeal?

1. Start the process. In most situations, directions for starting the appeal process is included with the tax bill. If it isn't, it can be as simple as calling the tax agency's number to learn how the process is handled. In either situation, start the process as quickly as possible to ensure you'll be able to clear the problem up sooner.
2. Find what documentation you already have available. If the property is new this year, it's fairly easy for it to be mistaken for another model, trim level or other easily verified error, which can lead to an incorrect assessment. In that situation, you may be able to prove the equipment's value from the invoice. However, if it's had any use at all, you may want to consider that the value may have already dropped, much like when a truck leaves the dealer's lot with the new owner.
3. Consider whether that documentation represents an accurate value. If it's new equipment that had any use at all, you may want to consider that the value may have already dropped, much like when a truck leaves the dealer's lot with the new owner. In addition, if the equipment has been used hard, it may have already depreciated in value enough that even a reasonable tax assessment may be much higher than the equipment's actual value.
4. Get a certified appraisal report. If you can't come up with any documentation of the value, or if you feel that the value may have changed since that documentation was produced, your next option is to get an appraisal performed. However, you'll want to make sure the individual performing the appraisal has experience working with that type of equipment - after all, the tax assessor who first determined the value used by the tax office deals with a wide range of property, but usually doesn't have the specialized knowledge to deal with the variances in particular equipment types.
5. Send or bring your documentation to the tax agency for the appeal. Once you have your documentation in hand, present it to the tax agency in the manner recommended in their appeal process. If you're providing an appraisal report, make sure that it's from a certified appraiser who knows what methodologies to apply in your case.

By taking the time to fight a bad personal property tax appeal, you're protecting your bottom line. If you do need to have an appraisal performed on your equipment, please remember to have it performed by a certified appraiser. The certification process provides the appraiser with the knowledge and expertise to use the right methodologies for your case, methodologies that have been proven in a wide range of situations, including personal property taxes. When you follow these simple steps, your bad appraisal can soon be a thing of the past.

When it comes to life, there are two things that are certain: death and taxes. However, just because you need to pay taxes doesn't mean you should just pay a bad tax appraisal that reflects too high a value for your machinery without a fight. But when it comes time to appeal your bad tax assessment, how will you verify the value of your machinery? With a certified equipment appraisal. Here's why it's important to use one to build your case.

Fight a bad tax appraisal with a certified equipment valuation

You know it's coming, at the same time as it does every year - property taxes. If you own significant machinery, it can seem almost inevitable that you'll be paying a high amount for your taxes again this year. But when you look at the appraised value of your equipment, is that value in line with what the equipment is actually worth?

Tax appraisers and assessors spend a lot of time trying to figure out the value of a wide range of items, from real estate to industrial machinery to the car you drive every day. Unfortunately, this means that they're not always very accurate when assessing something that's different from what they see on a daily basis. It's probably pretty common for a property tax assessor to determine the value of a compact sedan or a three bedroom, two bath house. But the equipment that is your company's livelihood is usually much more rare. This can cause serious problems when it's time for the tax assessment.

The appraiser may make a mistake by assuming that your equipment is in better or worse shape than the reality of the situation. You may have a beaten backhoe that was appraised on book value even though it's been through two floods and had significant damage from a tumble down a steep embankment last year. You could also run into issues when an assessor thinks that you have a 48 HP tractor instead of the much lighter-weight 18 HP tractor that is only worth half as much. Issues like these should not be allowed to stand and should be challenged through an appeal.

But how do you provide verification of what your equipment is actually worth? One of the best methods is to have a certified equipment appraiser prepare an appraisal report on that machinery. An equipment appraiser deals with machinery all day long, providing them with a strong level of knowledge and experience on the equipment in question. This also means they can easily tell the amount of wear your equipment has received over the years, allowing them to best appraise how that wear has impacted its value. Because a certified appraiser goes through a certain amount of education and experience, they use standardized methodologies that have been tested in tax agency circles for years.

By taking the time to get a certified equipment valuation, you can fight a bad tax appraisal and win. But beyond a simple property tax appeal, you can gain additional benefits from your valuation, including verifying value for insurance claims, providing proof of value for a sale, documenting machinery condition and similar areas of concern. Make sure you work with a certified equipment appraiser to ensure you'll get an accurate appraisal that will provide you with significant benefits.

When your business has a significant investment in your equipment assets, knowing the value of those assets and having the ability to leverage that capital can make all the difference when you're trying to grow your company. Though you could simply take an equipment dealer's word on that value, a bank appraisal can provide you with an accurate value that takes a wide range of factors into account. Here's a quick overview of how this type of equipment appraisal helps you leverage your company's machinery assets for better growth.

How can a bank appraisal help you get more out of your equipment?

If you're considering growing or making changes to your business, it's pretty common to pursue bank financing to make those changes. However, with the increased rules and regulations that were put into place following the 2008 recession for business loans, many financial institutions are requiring additional assurance that you have the ability to pay back a loan. One of the areas where this can impact your company's assets is through an appraisal of your company's machinery. How does this type of appraisal work and what other benefits can you reap from the process?

A financial appraisal takes a solid look at your company's assets and their value in the free market. A certified equipment appraiser spends their days reviewing equipment values. This gives them a very specialized skill set and an advanced knowledge of machinery that can be leveraged for your company's growth.

To start, the equipment appraiser will look at the equipment's condition. Because they have extensive experience working with a wide range of equipment, they know what to look for in terms of wear and tear, potential abuse issues and overall value on the open market. This also makes them very good at noticing potential issues with your equipment that may have otherwise been missed. By catching these issues early, you can make repairs or additional maintenance before small, easy problems become big, expensive ones.

Another area where you can see strong benefits for your company is by knowing the right value for your equipment. Most companies use tax-agency-based depreciation tables to determine what equipment is actually worth. However, that doesn't mean that the value from those tables is correct. Almost every company has a piece or two of ancient equipment that is still providing exceptional service long after it was declared worthless by the depreciation tables, whether it's an aging table saw or an old truck that keeps on rolling. At the same time, many companies have purchased equipment that has failed prematurely, either through abuse or excessive use, or through poor engineering and design. These same depreciation tables show that equipment as having value long after it has become virtually worthless.

Knowing what your equipment is worth through a solid bank appraisal allows you to leverage that equipment to grow your company into a promising new future. But don't trust just anyone who knows a little about equipment values to give you an accurate value. Certified equipment appraisers use tested methodologies that hold up well in virtually all circles, whether financial, legal, insurance or tax concerns are under scrutiny. Make sure you work with a certified appraiser to ensure the money you spend on an appraisal provides you with the most accurate results available.

When equipment you've invested in has become obsolete, it can wreak havoc on your business' accounting, especially when it has not yet been fully depreciated. How do you deal with economic obsolescence in your company? Here's a quick look at what it is and how to best deal with it when it happens in your business.

How equipment appraisal helps you deal with economic obsolescence

I remember the first time I ran into a case of economic obsolescence in a piece of business equipment. Back in 1992, my parents invested in a 286 computer for their business, to run accounting and correspondence. Several years later, I found them a newer computer for the business, so the older desktop came home. Following a number of creative hacks to try to keep the system running for nearly 18 years, my mother finally asked, "That old computer probably isn't good for much more than a boat anchor anymore, is it?" The rejoicing at that point, albeit quietly in my head, was epic.

When equipment is no longer able to be updated to remain useful, it's said to have become obsolete. Economic obsolescence is the point at which it costs more to try to maintain older equipment than to replace it. Unfortunately, this can cause some serious problems with your company's books, especially if the machinery is not yet fully depreciated.

One industry where this regularly happens is IT. Because of the rapid progression of computer technology, it can seem as though every week a faster processor, bigger hard drive or a larger memory stick is coming out. Software from three years ago is no longer being supported by the developer, making it impossible to take care of security issues. When these assets are not yet fully depreciated, they still show value on the books even though they have become completely unusable in daily operations. 

That doesn't mean you won't get any money for it in a sale, but it would require spending time, effort and money to find the right buyer. Some computer companies build their own testing labs by purchasing older systems that may be used by their clients, but these labs are not where the company makes money as much as where they provide customer support and service to ensure the product they're developing will work well on the client's system. Though it has some value for the company, it's not in the profit sector of the company, so is often disregarded in terms of value.

For this reason, an equipment appraisal can help fix this problem. Because a certified equipment appraiser should have experience in the industry in question, they typically have a good grasp of when a technology or piece of equipment is no longer able to remain competitive in the real world. They can help provide a value for the equipment that is realistic, and their appraisal is well documented.

When you have a situation of economic obsolescence in your company, one of the best options to record the loss of machinery value is through an equipment appraisal. When you work with a certified appraiser, they have a good grasp of your industry's rate of progress and understand when certain classes of machinery become obsolete. Because they use standardized methodologies, their appraisal report will stand up well to scrutiny from outside interests, whether it's the legal system, a tax agency, an insurance company or a financial institution.