An appraiser keeps a work file of all documents and information reviewed during an appraisal so that regulators or appraisal colleagues can review it if necessary. Learn more about what the typical appraisal work file contains and how you can understand its significance as a lay person.
What is in the appraisal work file?
According to USPAP, the Uniform Standards of Professional Appraisal Practice, appraisers must maintain a work file that includes all of the data, information, and documentation that supports the appraiser's conclusions about equipment values and opinions relevant to the machinery appraisal.
Any document that the appraiser used in determining the machinery value must be included in the work file. For example, if the machinery appraiser reviewed a technical manual for a piece of equipment, then a physical copy of the manual must be included. If the appraiser photographed the item to research its value and show its condition at the time of the appraisal, these photos then become part of the records kept in the work file.
Copies of any equipment appraisals, and appendices included with the appraisals, must also be included in the work file. This is good to know in case your copy of the report becomes lost or you lose an appendix or chart included in the appraisal.
If the document cannot be included in the work file, then the appraiser must be able to access it quickly.
In some states, the appraiser must include their professional certifications in the work file. This protects the appraiser and protects you, the owner of the equipment. After all, you will use your machinery valuation for equipment sales, machinery insurance, or another purpose. It is in your best interests to know that the appraiser who conducted your machine appraisal was knowledgeable, informed, and current with professional credentials. It provides peace of mind for you that your assets are protected and your appraisal represents the item's fair value.
An appraiser should open the work file when they begin conducting the appraisal and add to the work file as they gather the information needed to develop the report. They cannot gather information after the appraisal report has been issued and put it in the file.
What you can learn from the work file
Typically, machine appraisers use dedicated formulas to calculate the value of an item. For example, appraisers will calculate the normal useful life of a piece of equipment to determine how much longer it will be of value to the business. Charts used to make this calculation will be in the work file. By reviewing this, a business owner can learn how valuable their item would be if they wished to sell it, plan for replacement before the machinery becomes obsolete, and make a decision on whether to repair or replace the item. Understanding the item's condition and history, and how those affect value, help you plan for sale or disposal of the item.
A knowledgeable appraiser will be more than happy to discuss the appraisal work file with you, explain anything you do not understand, and answer questions you have about the machinery valuation. So don't be afraid to ask your equipment appraiser for an explanation if there is something in the file that confuses you.