Equipment Appraisal Blog | Understanding Machinery Appraisals

How do Standards of Value Impact Your Equipment's Appraisal?

Posted by Equipment Appraisal Services on Tue, Dec 19, 2017 @ 01:40 PM

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When your equipment is a large part of your business assets, the value of that equipment can strongly impact your bottom line. When equipment is appraised, standards of value are used to help calculate that value. But what are these standards, how can they impact your equipment's value and why are they used in particular situations? Here's a quick overview to help you get started in understanding this appraisal concept.

How do Standards of Value Impact Your Equipment's Appraisal?

Standards of valuation have been developed over the years to ensure that machinery is being appraised in a way that provides consistent calculations and results. Because of this history, an appraised value from a certified equipment valuation specialist holds up well to strong scrutiny in a wide range of areas. However, values are calculated differently depending on the situation.

A company that is undergoing bankruptcy may have their equipment appraised at liquidation value, as it's expected that the equipment will need to be sold quickly to pay off any debts. Investment value refers to the machine's ability to provide business income, such as a welding robot on a factory floor. 

One of the most common types of equipment appraisal that is performed is fair market value. It's such a wide-spread appraisal type that it's required in some specific legal situations, such as a divorce or litigation involving the dissolution of a partnership. In calculating this value, the appraiser looks at a wide range of aspects including the equipment itself, the conditions in the market where it is used and similar aspects. As an example, a drill for oil exploration will have a much higher market value during an oil boom than when oil prices fall and exploration is at a minimum.

These different appraisal types can drastically impact your equipment's appraised value. Fair market value assumes that you can wait a while for the right buyer who is willing to pay what the machinery is worth, while liquidation value may be much lower to assure a fast sale. Different values may be determined for large or difficult to move equipment based on whether the machinery is sold in place or to be moved, due to the high cost of moving it to a new location.

The different values are impacted by a wide range of factors, and the final appraised value may not match what you've been told by a local machinery dealer. Why? If a machinery dealer offers you a higher price for your equipment than what is calculated, it may be due to a push to move their new equipment, allowing them to make a higher offer on older machinery to get their new equipment moved.

On the other hand, they may offer you a much lower price to convince you that your machinery is virtually worthless to help encourage you to replace it with equipment that has more equity. Whatever reason for the disparity, a certified equipment appraiser has been taught specific methodologies during the certification process that have been proven to hold up well in legal, financial, insurance and tax agency circles.

By knowing how standards of value affect your equipment's reported value, you can get a deeper understanding of how the valuation process works and how different situations and conditions can impact that value. This helps you get a better comprehension of appraisal reports, allowing you to better leverage your equipment value to your company's benefit.

Tags: Equipment Appraisal, standards of value, ASA accredited appraiser

What exactly is a USPAP compliant appraisal?

Posted by Equipment Appraisal Services on Tue, Oct 10, 2017 @ 03:02 PM


When you're considering having an equipment valuation performed, one option that is available is having a USPAP compliant appraisal performed. But what exactly is USPAP and how are appraisals that are compliant to USPAP standards different than other types of appraisals? Here's a quick look at this type of appraisal and how it can benefit you.

What exactly is a USPAP compliant appraisal?

Standing for the Universal Standards of Professional Appraisal Practice, this represents a set of standards set and published by the Appraisal Standards Board, which in turn is authorized by the Appraisal Foundation. The Appraisal Foundation itself was authorized by Congress to be the source of appraiser qualifications and appraisal standards. Though USPAP appraisal practices were initially focused on real estate appraisal specifically, it has since grown to encompass virtually every possible item that can be appraised in business. 

But how can these standards benefit your equipment appraisal? Because of the high scrutiny under which USPAP has been developed and the number of different situations under which it has been applied, it has developed into a comprehensive standard that deals well with a wide range of situations. Over time, it has been tested in a wide range of legal, financial, insurance and tax agency circles. For this reason, it has become a trusted standard that provides business and equipment owners with many benefits.

When a business suffers a loss, whether due to a fire, natural disaster or theft, insurance companies must be dealt with. If the equipment has not been properly appraised, the business has no basis for claiming a value different than the one generated by the insurance company. But the insurance figure may be a generalized average across the industry, which does not recognize that the equipment has been maintained exceptionally well in a clean, dry environment. How do you fight that figure?

What about when a tax assessment is much too high on a piece of machinery that was purchased as a disposable asset, intended to be used hard for a short period of time? When a piece of equipment is purchased as a stop-gap until something different can be made to work, it often doesn't receive the best treatment. Receiving a high assessment on a machine that has a much lower value can be difficult to fight.

When you're getting ready to expand your business, do you need to secure financing using your equipment as collateral? How can you prove to the financial institution how much it is worth? A business loan can be difficult enough without having to deal with proving your equipment's value to the bank.

Fortunately, when a USPAP appraisal is performed, it provides documentation of the machinery's value, which will hold up to strong scrutiny in a wide range of situations. The standard has been tested in many situations, so it is trusted as an accurate measure of value for the machinery in question. An appraisal report prepared by a certified appraiser ensures that your interests are being protected during the process.

Though a USPAP compliant appraisal seems like a complex process, its many benefits help provide you with a wide range of benefits. Because a certified appraiser is already familiar with these standards, they're able to properly apply them to your equipment appraisal to ensure you get an accurate value. Working with a certified equipment appraiser provides you with a range of protections that may last well into the future.

Tags: USPAP appraisal, standards of value, certified appraisal

What are standards of value in equipment appraisal?

Posted by Equipment Appraisal Services on Wed, Feb 03, 2016 @ 10:30 AM


One of the key concepts used in equipment appraisal is that of standards of value. Though that term is often bandied about, what does it actually mean? In this piece, we'll investigate what standards of value are, how it affects your equipment's value and what types of standard is used based on your end goals.

How standards of value affect your equipment appraisal

What are standards of value?

Standards of value is a term that can be somewhat confusing, as it refers to two different concepts. One is the machinery valuation in a particular currency or medium of exchange, which can be of vital importance on the international market. But it can also refer to the type of valuation that is performed by a qualified equipment appraiser on your machinery. For the purposes of this article, we'll discuss the second standards of value referring to the value of a piece of business equipment that needs to be appraised and how the different values can affect your bottom line. Depending on your end purpose for the equipment in question, you may need a significantly different valuation method used, so it's of vital importance that you discuss your intentions with the equipment appraiser before the machine appraisal process is started.

How do different standards affect your equipment appraisal value?

Businesses have many different reasons for having an equipment appraisal performed for their company. They may be trying to determine when it becomes more cost-effective to sell off older machinery that is no longer keeping up with demand. They could be determining the salvage value on older equipment to determine whether it makes better economical sense to continue repairing older equipment or to replace it, and how much the salvage of the older equipment may offset the cost of the replacement equipment. They may need to know the replacement value in case of a fire or other disaster for insurance purposes. 

What standard is best for your purposes?

Unless you're considering a forced asset sale due to financial difficulties, most standards of value are used for a few specific purposes. The first is to get a more accurate financial picture for the business by updating the actual value of equipment that has been completely depreciated, whether it's because you're considering a merger, buy out,  sale of the business or other ownership change. The second is to prove the value of machinery in case of a loss, so that insurance claims can be filed in a timely manner, ensuring your company is able to recover from the los and continue operations effectively and with minimal down time. The third scenario involves expanding or reinventing the business' direction, with the appraised equipment standing as collateral for a potential financial loan to make the expansion or change more feasible. Of course, any of these types of standards will also provide you with a better view of your business' financial health, making it much easier to make smart investment decisions.

By keeping these different standards in mind, you can have a machine appraisal completed that is in line with where your intentions lay. At Equipment Appraisal Services, our valuation specialists are certified through the American Society of Appraiser's Machinery & Technical Specialties designation, so they deal only with heavy equipment on a regular basis. This helps our appraisers give you the most accurate equipment appraisals in the industry. Please contact us today to discover exactly what your equipment values are and to get a better picture of your business' bottom line.

Tags: standards of value, appraisal