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.

When you are trying to find an equipment appraiser who can provide quality equipment values, how do you know a good company from a bad one? Equipment appraisal firms provide machinery appraisal services to the business community and must be reliable and accurate in their documentation. Here's our look at how equipment appraisal firms operate and what to look for in a quality machine appraisal firm:

How Equipment Appraisal Firms Operate

Equipment appraisal firms provide quality machine appraisal services to a variety of industries. Though other people may purport to provide equipment appraisals, only a report from a certified equipment appraiser may be accepted in a variety of situations, including legal action, financial transactions, tax appeals, risk management and similar situations. But what makes an equipment appraisal firm different than someone who may perform appraisals for a dealership, auction company or similar business?

Independence and Scrutiny

One area to take into consideration is independence. An independent machinery appraisal company provides documentation of the machine's value that will stand up to scrutiny because they have no vested interest in the outcome of any transaction. By comparison, think about the last time you went to a car dealership with a really bad trade-in vehicle. The sales reps took a look at your trade and, because they had a vested interest in selling you a new vehicle, appraised it at a much higher value than was actually worth. At that point, they can write off the loss as the cost of doing business and claim a lower profit for the year, lowering their taxes.

Proper Certification

Another area where qualified machine appraisers stand out is in the area of certification. Being certified by an accrediting agency or organization means that the appraiser has had training and been tested to ensure they'll use the appropriate methods and techniques when appraising your equipment. An Accredited Senior Appraiser (ASA) and Accredited Member (AM) in Machinery & Technical Specialties (MTS) are designations from the American Society of Appraisers (ASA) that proves that the appraiser you're hiring to value your machinery has a solid grasp of the techniques and methodologies used to value equipment. They'll often take into account different factors including the expected lifespan of the machinery, current market conditions and many more issues that can affect the valuation of your machinery.

Appropriate Approaches and Methodology

Part of the qualification for certifying as a machine appraiser includes learning how to apply the appropriate approach and methodology to the appraisal. This is of vital importance in many situations, including insurance claims, business value when changing ownership or buying out a partner, getting financing for a business expansion, providing documentation for a property tax appeal and many other situations. If your machine appraisal doesn't include the appropriate methodology, it may be rejected and your effort and money wasted.

Now that you know what to look for in a firm offering quality equipment appraisals, it's time to find one that will work well with your company's needs. If you haven't found a company yet to provide you with quality equipment values, please contact our expert equipment appraisers at Equipment Appraisal Services.