Equipment Appraisal Blog | Understanding Machinery Appraisals

What to Look for in a Manufacturing Equipment Appraisal

Posted by Equipment Appraisal Services on Thu, Nov 12, 2015 @ 10:30 AM

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When you need an appraiser for a piece of manufacturing equipment, it is important that you hire the right equipment appraiser -- a person who is uniquely qualified to appraise the piece of equipment you have. Yet, how exactly do you go about finding the right person for your manufacturing equipment appraisal, especially if you have a tight deadline? Learn our tips for selecting a qualified equipment appraiser to pick the right person for your present need. 

Finding a Qualified Machine Appraiser: What to Look For

An appraiser performing equipment valuation can have a lasting impact on the value of your business assets, so it is vital that you pick the right person for the job. Here are several criteria we recommend using when selecting a manufacturing equipment appraiser

  • Certified - To protect yourself and get an accurate machinery valuation, look for an appraiser who is certified by one of the major industry associations, such as the American Society of Appraisers, and holds a specialty in machinery and technical equipment appraisals. Since appraisers come to the field from different backgrounds, they may have different work histories and educations. As long as they have a professional certification, they are independently certified to have the right experience for the job and you can hire them with confidence. 
  • Independent - In some cases, you may be getting a piece of equipment appraised to satisfy someone else. Perhaps your company is merging with another, or you are getting something appraised for insurance purposes. In these cases, there is another party who has a vested interest in the equipment's value and who could stand to benefit from a lower appraised value. For this reason, we recommend hiring an independent equipment appraiser instead of someone who has a tie to the parent company or insurance company. At Equipment Appraisal Services, we offer independent machinery appraisals to individuals and companies. 
  • Knowledgeable - Machine appraisers specialize in different niches and industries. One might be an expert in car manufacturing equipment, while another might be a scientific equipment appraiser, and another a farm machinery appraiser. You wouldn't take a tractor to an appraiser who regularly appraises scientific equipment; that individual would not have the degree of knowledge necessary to accurately value your equipment. Before you hire any appraiser, make sure they know your niche. 
  • Personable - Finally, you will need to discuss the appraisal with your appraiser so you understand the equipment value of your machinery and can act accordingly. For this reason, we recommend hiring an appraiser that you have a personal connection with, and who possesses all the criteria listed above. 
  • Fits Your Budget and Time Frame - In many cases, you have a time constraint and a budget for your machine appraisal. A qualified appraiser should be able to quote you a cost for the equipment appraisal and estimate a time frame of when they can complete the appraisal for you. To reduce your stress and ensure the best possible outcome, it is important to ensure that any appraiser will be able to meet both your budget and your time frame before you begin. 

Before you hire an appraiser to generate equipment values, ask them several questions either in person or over the phone to gain an understanding of their qualifications for your needs. Then hire someone with whom you feel comfortable and confident proceeding. Have you ever had to hire equipment appraisers? What criteria did you use to make your choice? 

Tags: equipment values, equipment appraiser, manufacturing equipment appraisal

Understanding Levels of Equipment Values When Selling a Company

Posted by Equipment Appraisal Services on Fri, Sep 04, 2015 @ 11:00 AM

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The price you would be willing to accept if you were selling a company is highly related to your motivation for selling your company. If someone came up to you and held a gun to your head, you would probably agree that any price they suggested was reasonable.  If you were a billionaire and decided you were tired of one of the companies you owned, you could take your time and wait until you got the price you wanted.

Before selling a company with assets that include expensive machinery and equipment, it is important to know the machinery and equipment values. A machinery and technical specialties (MTS) appraiser is the person to call because he or she has the specific knowledge and expertise it takes to accurately determine machinery and equipment value. A professional equipment appraiser will do a thorough analysis of the equipment, taking into account its age, condition, replacement cost, and many other factors. In addition to the in-depth analysis of the machinery and equipment, the reason for selling a company will help the appraiser provide you with the most accurate equipment appraisal.

Levels of Machinery and Equipment Values

Levels can be thought of as reasons for selling a business. While there are many nuances to machinery valuation, most sales can be categorized as being sold at fair market value, at an orderly liquidation value, or at a forced liquidation value. Each of these values take into account the uses for the equipment, the compulsion to buy or sell, and the time that you have to sell.

Fair Market Value

Used machinery equipment appraisals are opinions and the value quoted is a starting point for negotiation between the buyer and the seller. It is natural for some tension to exist between the two parties to any negotiation. If a buyer is in desperate need of a seller's equipment, the seller can usually negotiate a higher price. If the seller "needs" to sell equipment, the buyer may get the equipment for a bargain. When a willing seller and a willing buyer are under no compulsion to buy or sell machinery or equipment, a machinery and equipment appraisal can help to establish a fair market value and facilitate a sale. 

Example: A seller could command top dollar for his machinery under the following scenario. A crucial piece of machinery breaks down and halts the production line. For every day the machinery is down, the company loses $10,000. The owner of the manufacturing company finds out that it will take three months to fabricate a new machine. So, he scrambles around and finds another manufacturing company that has the same type of machine. Under normal circumstances, the machine may have a fair market value of $50,000, but because the buyer is in a desperate situation, the seller can ask and get $70,000 for his machine.

Orderly Liquidation

In an orderly liquidation, the seller has a reasonable amount of time to sell the company's machinery and equipment. A machine appraiser would consider the date at which the machinery must be liquidated and the reasonable valuation that would attract a willing buyer within that time period. An example of the need for an orderly asset liquidation might be an owner who wants to retire by a certain date and will need the proceeds of the sale to buy his luxury condo in Miami Beach.

Forced Liquidation

A machine appraisal would probably come in at the lower end of the spectrum when the sale of a machine is mandatory and not a matter of choice. A judge in a bankruptcy case may order the machinery, equipment, and other assets of a company to be liquidated in an attempt to compensate unpaid creditors.

Equipment appraisers are careful to examine all the factors that go into the value of equipment. Sometimes, why you are selling is almost as important as what you are selling.

Tags: equipment values, equipment appraiser, selling a company

The Hows and Whys of Industrial Apprasial

Posted by Equipment Appraisal Services on Mon, Jul 20, 2015 @ 02:30 PM

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Industrial Appraisal — it may not seem like something you would encounter in your day-to-day work or personal life, but it may surprise you. You may need the services of a machine or equipment appraiser more often then you may need. Discover a few of the reasons why industrial appraisal may be necessary and the basics of how an appraiser does his or her job. Then, you will realize how many occasions this service could benefit you.

Why Appraise?

Usually, you will only use your equipment with no worries of the value. After all, as long as it is serving its purpose, why does it matter what the value is? However, sometimes something occurs where the value will matter. In fact, there are numerous reasons why you may need to have industrial equipment appraised. Here are just a few of the most common:

  • Financing or Refinancing – If your equipment is under bank financing, it is important that the bank have an accurate accounting of the value of the equipment. Only a quality appraiser can give you this information.
  • Accounting or Taxes – Though you may simply depreciate the value of your equipment over time, there are occasions where this does not work or where your accountant or the IRS requires that you have a more accurate accounting of the value. Appraising is the solution.
  • Litigation – Court cases, bankruptcies, and other legal issues can be a serious problem for your company. Good appraisal services make this a much easier process and ensure that you are not harmed any worse than necessary.
  • Company or Personal Splits – When a company is bought out or a couple divorces, there is often a need to split up equipment and property for litigation purposes. Appraising it to get the correct value is vital.
  • Sales or Auction – Are you selling or auctioning off part of your equipment, perhaps because you are upgrading or replacing your old items? You want to get the best price for your old equipment. Offering an appraisal when you put your item up for sale will give buyers confidence.

How Does the Appraisal Process Work?

There are a number of appraisal companies out there offering this service. However, not every firm appraises in exactly the same way. You want to work with a machinery and equipment appraiser who is certified, trained and does not just “guess” at values. Ideally, you will find a company that will provide an appraisal report consistent with the Uniform Standards of Professional Appraisal Practice (USPAP).

The process takes time and involves more than merely looking at a depreciation schedule. The process may include data collection, research, analysis of the equipment in detail and considering data such as equipment depreciation - deterioration and obsolescence. Together all of these things help us put together an appraisal that will meet your needs for court, accounting or any other purpose.

If you would like to learn more about the appraisal process or you want to talk to an expert, contact us at Equipment Appraisal Services.

Tags: Equipment Appraisal, equipment values, industrial appraisal

Juggling Equipment Values - Why What You See isn't Always What You Get

Posted by Equipment Appraisal Services on Fri, Jul 17, 2015 @ 09:00 AM

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When you're considering buying or selling a piece of equipment, it can seem as though there is a world of difference between the price you expect and the price that's paid. Why is there such a difference in machinery valuation? Though we expect differences in price based on condition, age, location and similar properties, there can still be drastic differences in equipment values for virtually identical equipment, depending on the situation. Let's take a look at the differences in equipment value and why this happens.

Appraised Value

In the complex world of machinery and equipment appraisal, an appraised value is the most accurate indicator of the equipment value across the board, but doesn't always take into account issues such as local market conditions or an individual's motivation to buy or sell a particular piece of machinery. A machine appraisal involves having an equipment appraiser thoroughly examine the machinery and take into account any mitigating factors, such as modifications, kits or accessories that were added after the initial manufacture of the equipment. An appraised value is vital if you need to get financing on the equipment or are considering donating equipment with a value over $5,000. If you don't have equipment appraisals completed, you may not be able to finance the piece or write off the full value on your taxes.

Market Value

Beyond the value assigned by equipment appraisers, there's also the difference you'll see in the local or regional marketplace. As everyone learns in economics, this value is strongly tied to the laws of supply and demand. If you're in an area where a lot of construction is needed following a hurricane, you may pay a high premium to purchase equipment locally. If, on the other hand, you wait until the vast majority of the construction has been completed, you may be able to take advantage of lower market values because the market is suddenly being flooded with a lot of surplus equipment.

Offered Value

Adding even more complexity to the problem is the concept of offered value, or the motivation a seller has to lower or raise the price, depending on what their needs are. If a business has some surplus equipment but has the space to store it inexpensively or are taking advantage of an item that's hard to come by, they may ask a higher price than they would normally, waiting for a buyer who will maximize the money they're making off the deal. On the other hand, a business that is in a serious cash bind may be willing to let the equipment go for a lower amount than the machine appraisal would suggest. But beware - if a price seems too low, you may want to have an independent appraisal done to ensure that you're actually getting what you pay for. The machinery could have issues that are being covered up, such as an oil or hydraulics leak, that a trained equipment appraiser would be able to spot, saving you from expensive repairs.

In any of these situations, having a solid appraisal to back up machinery valuation helps protect your interests by justifying your price when selling and allowing you to negotiate when purchasing equipment. Make sure you use an appraiser accredited through the American Society of Appraisers and follows USPAP (Uniform Standard of Professional Appraisal Practice).

Tags: Equipment Appraisal, equipment values