Equipment Appraisal Blog | Understanding Machinery Appraisals

When it comes to selling used machinery and equipment, many people think the process begins and ends with placing a listing and waiting for a buyer. However, those familiar with the secondary market know there may be an important figure working behind the scenes to facilitate a fair, informed, and successful transaction: the equipment appraiser.

Traditionally, appraisers are viewed as professionals who determine the fair market value of assets for various purposes. However, in some instances, experienced appraisers, especially those with an asset management background, may consider taking on a more direct role in the resale of used machinery in the right situation, which would involve post-valuation advisory and consulting work.

One of the biggest challenges a seller can face is pricing. Set the price too high, and the equipment may sit on the market for months. Set it too low, and you risk leaving money on the table. An equipment appraiser uses detailed market analysis, depreciation trends, auction data, and comparable sales to determine a defensible, market-aligned value that will increase the chances of attracting serious buyers.

Appraisers often have extensive networks in specific industries, including dealer, broker, and end-user contacts. Their market knowledge allows them to identify potential buyers and suggest the most effective resale channels, whether that's a private sale, public auction, online platforms, or a brokered transaction.

Existing client relationships from prior valuations may also benefit the situation, where an appraiser might take on a complementary role with the seller, especially if that client has minimal experience liquidating used equipment on their own. They might advise on pre-sale improvements, such as minor repairs or upgrades that can meaningfully impact the sale price. They may also suggest bundling related assets or recommending timing strategies.

In some cases, equipment appraisers can act as independent brokers, helping to negotiate deals between buyers and sellers. Their presence as an unbiased third party can help close gaps in expectations and ensure the transaction proceeds smoothly.

Whether you're a business liquidating surplus equipment, a lender recovering assets, or a buyer looking for fair market deals, the direct involvement of a certified equipment appraiser can be the difference between an efficient and effective sale and a drawn-out, uncertain process.

In today's data-driven resale environment, the most successful transactions are rooted in accurate information, expert insight, and clear communication. No one is better positioned to provide that foundation than the equipment appraiser, who knows the market and can act as an independent source and provide value added to both buyers and sellers.

When valuing used equipment with the intent to sell, it can be a challenge to grasp that the ultimate sales price is often different than what it is appraised for. These two concepts might appear to be identical. However, that is often not the case. Here's a brief discussion of why that gap exists and what factors come into play:

The appraised value of any piece of used equipment is typically based on a combination of market and cost data, which looks at factors such as comparable sales and depreciated replacement cost. This is a good starting point and provides an estimate of what the equipment should sell for. However, this value determination doesn't guarantee it will actually be sold for that figure.

Supply and demand will always be a factor in determining the ultimate selling price of used equipment. If a particular type of asset is in high demand but experiencing a low supply, it might sell for higher than its appraised value. Conversely, if there is a glut of similar equipment on the market, the selling price can drop below what it's worth.

Timing can also heavily influence the final sale price. Selling during the off-season or when budgets are tight could result in lower offers, while selling during peak times or when there's increased demand can lead to higher prices. Seasonality and industry trends can fluctuate rapidly, impacting how much a piece of equipment might sell for in the open market.

The condition of your equipment will impact both its worth and potential sale price. Proper maintenance and upgrades can boost its value, while excessive wear and tear and outdated technology can bring it down. Equipment appraisers are typically not mechanics who can do a deep dive into this assessment and generally assume the assets are in normal operating condition unless specifically informed otherwise.

More customized equipment might be worth a lot to the right buyer but can have a limited resale market due to its specialized nature.

It is important to recognize that selling is often about psychology as much as it is about numbers. Buyers often want a deal or a sense that they're getting something special. This means that the equipment might sell for less if there are concerns or doubts—even if it's technically worth more. How the sale is negotiated, the relationship between buyer and seller, and the urgency of either party can all tilt the final price.

Understanding that there may likely be a gap between an item's appraised value and what it might actually sell for is key to setting realistic expectations. Research the market, consider the timing, and prepare for negotiation. By doing this, you can find a fair middle ground that respects the equipment's worth while also being competitive in the current market landscape.

Machinery & Equipment valuations rely in large part on available market data that can be researched and considered. This information can be in the form of recent sales, current listings, new equipment pricing, opinions on normal useful life, and average annual levels of market depreciation.

Two of the most common sources of this data are equipment dealers (vendors) involved in the retail sale of new and used machinery, and auction companies, who liquidate thousands of used machines each and every year through advertised public sales. How does an experienced appraiser review these sources, and consider them when valuing similar assets?

The answer to that question will likely vary somewhat depending on the appraiser you are working with, however, it is important to first understand the differences between equipment dealers and auctioneers, along with the levels of value each of these sources equate to.

New and Used Equipment Dealers

These market sources are usually experienced in specific equipment types and manufacturer/model lines and can provide valuable insights on the overall market, new and used equipment pricing, normal useful life, and how the assets typically decline in value over time. This data and their general opinions are viewed as direct Fair Market Value comparisons, however, they can also discuss how they purchase used equipment such as typical buy/sell margins from an Orderly Liquidation perspective.

It is important to keep in mind that, although equipment dealers are considered experts in their specific market areas, there may be some level of bias associated with their opinions. It is always a good idea to consider additional perspectives in order to gain a balanced conclusion of value.

Equipment Auctioneers

Auction companies are well recognized in many types of equipment markets, most notably in construction, earth moving, transportation, material handling, machine tools, and certain industrial manufacturing industries. Auctioneers provide a convenient, time-sensitive opportunity to liquidate assets under an organized public sale, and may even provide guaranteed buy-out options as an alternative for those unwilling to take on the risks associated with a “no-reserve” sale.

Because these sales are in the public arena, much of the data can be discovered quite easily through company websites, online databases, and other open sources. Auction sales data technically falls under the comparison to Forced Liquidation Value from an appraiser’s perspective, and actual realized sales can vary greatly depending on the type of equipment, buyer turnout, seasonality, and any number of other factors. Because of the potential inconsistency associated with this data, it is important to understand how best to consider it in conjunction with other sources of data to then conclude on a reasonable value.

In summary, new and used equipment dealers, along with auction companies, are considered two of the most important market sources of data for machinery & equipment appraisers. Making sense of this information and ultimately forming an opinion of value for the actual assets being appraised is the most critical step in any valuation effort. Engaging with an experienced, independent, accredited appraiser will provide you with confidence that the result will be credible and reliable.