Equipment Appraisal Blog | Understanding Machinery Appraisals

What happens when appraising construction equipment?

Posted by Equipment Appraisal Services on Thu, May 31, 2018 @ 12:22 PM

When you work in construction, your machinery is a big part of your company's assets. But part of being a responsible business owner involves knowing the value of your assets. How do you determine how much your equipment is worth once it's gone into service? Here's a quick look at what happens when appraising construction equipment.

 

What happens when appraising construction equipment?

There are a number of different areas that an equipment appraiser considers when appraising your equipment, some of them not what you may consider when setting up an appointment to have your machinery appraised. 

  • How old is the equipment? Though age isn't a solid indicator of performance, it can create a lower overall value as newer machinery has features that have become standard because they are very handy and help improve your rate of production. As an example, a miter saw with a laser cut indicator helps speed up cutting time, allowing your crew to get back to work on the project instead of lining up careful cuts one at a time.
  • What is that model's performance history? Some models are known to have specific issues that can impact performance, lifespan or functionality. If there has been a remedy provided by the manufacturer to deal with a specific problem that has not been installed on your machinery, it can negatively impact your machinery's value.
  • What features are available for that specific model? If you have a pickup to help haul materials and tools, does it have four wheel drive or a towing package that will improve its functionality on the job and improve its overall retail value? Added features and kits that improve functionality often improves overall equipment value.
  • What condition is the equipment in? If it's in good shape and has been well maintained, your equipment may value much higher than you may expect. If, however, it is nearing the end of its expected useful lifespan, the value may be much lower than you'd expect. A good equipment appraiser will take a solid look at the equipment's workings to determine its condition.
  • Are there signs that the equipment has been abused or neglected? If it's obvious that there are problems with the equipment, most people can pick up on it and would offer a lower value. But what if the equipment you're considering buying has had panels replaced or fluids changed to hide abuse or neglect? A good appraiser will catch issues like this.
  • Are there receipts or maintenance logs available? Being able to prove the machinery has been well maintained proves it has not been abused or neglected, as above, and may help build value through the documentation. It also helps the appraiser determine what has been done on the machinery, whether it has been well maintained from the beginning or if it has had to be rehabilitated at some point.
  • What is the industry or market like for reselling machinery? When the housing bubble burst and helped crash the economy, construction equipment wouldn't resell for very much, especially compared to a few years prior when the industry was booming and finding equipment was virtually impossible.

Appraising construction equipment can seem like a confusing process, but by understanding how that process works, you can have a better appreciation for how equipment values are determined. By knowing how the appraisal process works, you can leverage this information to your company's best interests.

Tags: construction equipment appraisal

Using a construction equipment appraisal to keep up with current trends

Posted by Equipment Appraisal Services on Tue, Jun 20, 2017 @ 01:27 PM

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As the building industry rapidly evolves, are you keeping up with the changes that are happening? If you aren't, you might not have an accurate picture of how valuable your heavy machinery is in the market. Fortunately, a construction equipment appraisal can help you stay on top of changes and take advantage of growth in the market without subjecting your business to unnecessary risk. Here's how it works out:

Using a construction equipment appraisal to keep up with current trends

Current industry trends in construction primarily focus on one particular aspect of building design: efficiency. The general change in the population towards healthier living, sustainability and lower waste on construction projects mean that today's construction company must provide high-quality, sustainable products and techniques while cutting waste and the end cost of the structure to the client. But how do you keep up with these changing trends? One way is by using well-maintained equipment that holds its value well while providing years of reliable service.

But overall, the construction industry is growing both across the country and around the world. As the industry grows, what happens to the value of your construction equipment? As growth overtakes equipment production, existing equipment becomes more valuable, but to what extent? Many businesses find that having construction equipment appraised helps them understand how their equipment values change over time and how that can impact their overall asset values.

However, with this growth also comes the opportunity to replace aging equipment. But how do you decide when it's time to get rid of older construction machinery? A good equipment appraiser spends all their time looking at equipment and writing up reports on its value. This means that they generally have a good feel for how long the remaining useful life span of the equipment may be. By determining this information, you can decide whether you need to change out that older grader that is getting up in years or whether you want to hang on to the old backhoe you have on site because it's still expected to provide years of reliable service, despite its age. This means you can choose the right time to sell, trade in or donate your older equipment for your business' best interests.

When you know your equipment values, you can also make smarter business decisions. When you think that your equipment is worth more than is realistic, you're more likely to take on risky investments because you think  you have the equipment assets and collateral to back up the investment. But when that investment goes south, you'll quickly discover you don't have the assets to cover the financing you took out for the investment. Conversely, if you think your equipment is worth less than is realistic, you may be missing out on fabulous opportunities because you don't believe you have the collateral or assets to make the investment. That means you won't see the level of growth your business is capable of achieving.

By keeping on top of your equipment values, you can quickly take advantage of favorable trends to grow your business while avoiding investments that could prove too risky. Construction equipment appraisal provides you with a wealth of information about your machinery, from its expected useful remaining life to any range of different sale situations. Make sure you take the time to get this important information today to help protect your business interests.

Tags: construction equipment appraisal, construction equipment appraisers

How a Heavy Equipment Appraisal Gives You a "Grade A"

Posted by Equipment Appraisal Services on Tue, Nov 29, 2016 @ 08:30 AM

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When you work in grading, working with heavy equipment is just part of the process. But what are your equipment values? Many businesses determine their equity based on tax accounting records, which may not give you an accurate picture of your equipment's value. Smart business owners turn to heavy equipment appraisal services to get the real value of their heavy equipment. Here's why:

How a heavy equipment appraisal is Helpful in Your Business

First off, let's take a good look at where tax accounting isn't helping you get the best out of your business. Tax accounting is focused on getting you the best possible results for your tax return. In most cases, this involves trying to lower the tax liability of the business as much as possible. Because it covers a wide range of industries and businesses, tax accounting is focused on what most businesses face rather than specific industries and businesses. For example, machinery is reduced in value using a depreciation table. This may not reflect the actual value of the machinery, just how much it is expected to lose value according to a table developed by the tax agency.

We've all seen heavy equipment that has been gently used and well cared for, resulting in a machine that continues to perform long after it has been completely depreciated. That equipment is an asset that still has significant value to the business owner, no matter what the tax tables say. Equipment appraisals do a great job of helping businesses recapture that hidden equity that isn't apparent in a tax return. The appraisal report provides you with legal proof if you need to make an insurance claim for a higher value than the adjustor is willing to pay without further proof. This type of documentation is also accepted by virtually every financial institution, because a certified equipment appraiser is able to document the standardized methodology and sources the appraiser used to calculate the value of the machinery.

What about the other side of the coin? We've all worked on sites that were absolute murder on equipment. Unless a machine appraisal is performed, your tax return will reflect a much higher amount of equity in that asset than may be realistic. It's bad enough knowing that the equipment will probably not last nearly as long as you had hoped when you bought it, but having to pay taxes on a false level of equity because a tax table dictates the machine's depreciated value is even worse. Because a machine appraisal from a certified equipment appraiser holds up to scrutiny and uses standard methodology to determine value, the report will stand up to serious scrutiny in court or during an audit.

By getting a heavy equipment appraisal, you're ensuring that you know the right value for your grading machinery. That will help you make good business choices, because you'll know whether you're negotiating from a position of strength or weakness, and whether that new investment is a good idea or a big risk. But are you working with an experienced, certified equipment appraiser? Using a certified appraiser ensures your machinery valuation will hold up to scrutiny in financial, legal and insurance circles.

Tags: construction equipment appraisal, heavy equipment appraisal

How a Paving Equipment Appraisal Helps with Bidding Highway Contracts

Posted by Equipment Appraisal Services on Tue, Aug 30, 2016 @ 11:00 AM

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When you're in the paving industry, you know exactly how cut throat and competitive highway contracts can be. From extra-early mornings spent monitoring the bidding process to figuring exactly how much it will cost to run the job down to the fraction of a penny, these low-margin, high-volume jobs can make or break your company. These jobs can make or break your company, between possible problems with suppliers and issues with financing the project. But how does machine appraisal fall into the picture? By having a paving equipment appraisal performed, you can determine the exact value of your assets and can leverage that value to procure better financing. You can also determine whether new paving machinery needs to be part of the bid you're placing. Here are the details:

How a paving equipment appraisal helps when bidding highway contracts

  • Insurance costs: When every penny counts in your bid, being able to have completely accurate insurance costs helps you make a win both in terms of the bid and in your business. Knowing exactly what your equipment is worth means that your insurance agent can completely customized your insurance policy to cover the actual cost of replacing the equipment, instead of paying a higher premium based on inaccurate numbers or ballpark figures. When pennies count, lower insurance premiums are a must.
  • Collateral for loans: Highway projects can be big - really big. Because they go so much further in terms of material and labor than most other types of jobs, they can often overrun the average paving company's working capital. To make sure you can leverage every possible asset, having a machinery valuation performed helps provide proof of the exact value of your assets. Knowing exactly how much you can leverage to make the job happen can be all the difference between a highway contract that's well within your comfort zone and one that's just out of reach. This can help keep you from getting into trouble because you didn't properly estimate your equipment values and ran too much risk during the project, putting your business in danger.
  • Fines for delays: Nobody likes waiting for road construction to get done, which is one of the reasons fines for delays in completion can be so steep, especially in fast track projects. One of the areas where a quality machinery valuation makes all the difference is in determining expected lifespan of your equipment, allowing you to purchase your new equipment ahead of when its needed or avoid the extra purchase all together if the equipment valuation specialist determines that your paving machinery should be able to make it through the job without any major problems.
  • Avoiding legal issues: If something goes wrong, having a quality equipment appraisal performed ensures that you have proof of your equipment's condition before the trouble started. If the state or another contractor is claiming that there were problems with the job because your equipment was substandard, wouldn't you like to have the paperwork on hand to prove them wrong?

By keeping these benefits of a paving equipment appraisal in mind when bidding your next big highway contract, you can ensure that your company is still making a profit and not risking losing everything due to failing equipment, excessive costs or insufficient capital. If you need to have a paving equipment valuation completed on your paving machinery, contact a qualified and certified equipment appraiser department. We've been providing quality equipment appraisals for years and are happy to help you make your business everything it can be.

Tags: construction equipment appraisal, paving equipment appraisal

Top Ten Reasons to Have a Construction Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Jun 28, 2016 @ 01:30 PM

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The construction business is a significant contributor to the global economy. According to Statista, the global construction equipment market was estimated to be $145.5 billion in 2015, with the North American market holding a position as the second largest market worldwide for construction equipment. Companies engaged in construction projects know the impact of crawlers, dozers, backhoes, excavators, loaders, earthmoving equipment, cranes, drilling equipment and more on their ability to perform effectively and sustain their profitability, but they don’t always know the current equipment values for the assets they have in their inventory.

Construction equipment often takes a beating, given the arduous conditions under which it is usually called to perform, but it can still have a value to the company for its useful remaining life and also as a potentially saleable asset. A professional machinery valuation can give managers the edge they need in the decision-making process, and can also serve as a protective factor in the case of untoward events. Here are the top ten reasons construction companies should keep in mind when considering whether or not to have a construction equipment appraisal:

  1. Tax Purposes: An accurate and updated record of equipment values is helpful in supporting depreciation claims when filing income tax returns.  
  2. Business Analysis Purposes: Business decisions are made every day which require accurate input and data. A manager needs to rely upon solid equipment valuations when deciding whether to expand, purchase additional equipment, seek additional funding, or bid on new projects.
  3. Sale of Business: A prospective buyer will want to know precise equipment values in order to ascertain a fair purchase price and initiate asset record-keeping.
  4. Bankruptcy: If the business does fail, it will be necessary to have an accurate machine appraisal for all equipment in order to place a value on the company’s assets for creditors.
  5. Dissolution: Whether a business is dissolved completely, or one partner buys out the other, a valuation is required to ensure an equitable division of assets or acceptable purchase price.
  6. Divorce: Business assets will be treated similarly to personal assets when dividing up property during a divorce.
  7. Insurance: Construction companies need to be as prepared as possible for the unexpected, so a sufficient amount of insurance coverage is required. If equipment is lost, damaged, or destroyed, current appraisal records will be required in order to negotiate a reasonable settlement amount with the insurance company.
  8. Loans: Existing equipment is often used as collateral when securing bank financing for operating purposes, expansions, upgrades, or purchase of additional equipment. Loan officers will want to see sufficient data to justify any loan amounts being considered.
  9. Donation: A business may decide to donate some of its older or outmoded equipment to a charitable organization in order to receive a tax consideration. Any donation listed as being over $5,000 on the 8283-tax form will require an equipment appraisal for IRS purposes.
  10. Estate Considerations: The executor of an estate must be able to reasonably demonstrate equipment values to all the heirs and the government to ensure an equitable distribution of assets.

When a business needs a construction equipment appraisal for any reason, it is best if the report is assembled and reviewed only by an accredited appraiser. These professionals are well-trained and experienced in providing accurate equipment appraisals. If the appraisal report does not meet the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines, it is not considered a “qualified appraisal,” and will not pass intense scrutiny from buyers, attorneys, bankers, the IRS, or the courts. 

Tags: construction equipment appraisal

Construction Equipment Appraisal Can Boost Business Sales Price

Posted by Equipment Appraisal Services on Mon, Aug 24, 2015 @ 08:00 AM

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When selling a construction business, some owners are confused by the need for a construction equipment appraisal. They wonder why they can’t take the equipment purchase price, subtract any accumulated depreciation, and use that as the equipment value. While this may seem like an expeditious approach, it doesn’t always yield the best results when providing a machinery valuation to potential buyers.

Most business owners purchased their construction equipment at various times and in various conditions, building an inventory of cranes, backhoes, forklifts and other used machinery and equipment over the years. Some pieces of equipment may have been used more heavily than others, but were maintained well enough that they still have plenty of useful life left in them. When the business is sold, the owners want to receive the highest sales price possible. Buyers, on the other hand, want to pay the lowest price possible.

That is why it is necessary to bring in an accredited equipment appraiser to assess equipment values whenever a business sale is considered. Equipment appraisers that have received the Accredited Senior Appraiser (ASA) or Accredited Member (AM) designations in Machinery and Technical Specialties (MTS) from the American Society of Appraisers (ASA), and can provide needed support information that could help substantiate an asking price. The benefits of a professional machine appraisal include:

  • Appraised Value is Often Higher than Depreciated Value: The depreciated value of a machine is a useful calculation, often for tax purposes, but it doesn’t necessarily reflect the actual value of a particular piece of equipment. An appraiser can take into account maintenance, wear and tear, potential sales price on the open market, and estimated remaining lifetime earning potential among other factors to arrive at an equipment appraisal.
  • Buyers Appreciate Sellers Who Can Help Make Their Lives Easier: Since the sale price of a construction business is often quite substantial, there is usually some type of bank financing involved in the purchase. Any lenders will want the buyer to provide a machinery and equipment appraisal for collateral purposes and to justify the loan amount. Once the sale is complete, the buyer will need to set up its own asset and depreciation accounts, and will also need this information.
  • International Sales Open a Wider Market: Perhaps the business has grown to a point where it could attract the attention of an international conglomerate, which could raise the sales price substantially. International buyers, however, will need to see proof that the price they are paying is comparable to what it would take them to establish their own foothold in the market. The often rely on a machine appraiser to help them understand valuations and opportunities in international markets.

A construction equipment appraisal from an equipment appraiser is definitely a plus when selling a business. Equipment Appraisal Services is a nationwide provider of certified machinery and equipment appraisals for business sales, insurance recovery claims, divorce and partnership dissolutions, gifting and donation justifications, estate settlements, allocation of assets, property tax appeals, mergers and acquisitions, financial reporting, and risk management.

Tags: construction equipment appraisal, equipment appraiser