Equipment Appraisal Blog | Understanding Machinery Appraisals

What is USPAP and Why is it Important in Appraisal Reports?

Posted by Equipment Appraisal Services on Mon, Aug 09, 2021 @ 08:00 AM

Machinery Equipment Appraisal Appraiser USPAP Compliance

When you speak with potential appraisers about engaging in a valuation effort, whether it’s for machinery & equipment, personal or real property, business, or anything else, you should be asking if their work complies with USPAP standards. Before you ask the question, though, here is an overview of what USPAP means so you can better understand the importance of this appraisal requirement.

What is USPAP

USPAP is short for Universal Standards of Professional Appraisal Practice and is considered a type of quality control to a formal valuation process. It was established prior to the Savings and Loan Crisis in the late 1980s and then taken over by a committee called The Appraisal Foundation (TAF) to ensure that artificial inflation of an appraisal did not grow out of control again as it did during that period.

The standards that comprise USPAP are updated every year which allows it to stay current with changes in the industry and any new regulations. Though it's mainly used in the US, it has been adopted in whole or part by a large number of professional appraisal organizations in other countries. Its focus is not on controlling the actual methods an appraiser utilizes but on specific standards for the appraiser’s qualifications, ethics, scope-of-work rules, report writing requirements, record-keeping, client disclosures, signed certifications, and related topics.

There are specific standards that pertain to all types of appraisals and can vary by valuation discipline, including machinery & equipment, business, real property, and personal property. As an accredited appraiser, whether you are a Senior ASA with the American Society of Appraisers (ASA) or affiliated with another valuation group, you are required to meet the qualifications for USPAP. This begins with a 15-hour course for first-time professionals, with continued compliance every two years to ensure the appraiser stays abreast of new developments. The follow-up courses are 7 hours long, however, if you miss one of these 2 year periods, you are required to go back and take the 15-hour course again.

The appraiser is issued a certificate after each course, which can be provided to you upon request. Once you have confirmed the valuation professional is USPAP compliant, you will have confidence that he or she is well-educated and experienced in the appraisal profession, and can deliver a well-researched, supportable report.

Becoming an accredited appraiser requires continuing education not only in USPAP but as an ASA professional as well. By understanding the USPAP Appraisal Standards and how they impact your valuation in terms of the individuals involved in the work effort, you gain valuable insight into the importance of engaging with the right people to complete this for you.

Tags: USPAP compliant appraisal, machinery & equipment appraisal, ASA accredited appraiser, USPAP appraisal standards

What Happens in a USPAP Compliant Appraisal?

Posted by Equipment Appraisal Services on Mon, Oct 12, 2015 @ 01:00 PM

USPAP_compliant_appraisal

When you're looking at having a machinery and equipment appraisal completed on your equipment, you may hear the term USPAP thrown around or hear the machine appraiser refer to a USPAP compliant appraisal. But what does it mean and how does it affect your equipment values? Here is more information on USPAP, what it requires of equipment appraisers and how it affects your machine appraisal.

What is USPAP?

USPAP stands for Uniform Standards of Professional Appraisal Practice, a set of standards devised by the The Appraisal Foundation and, from there, The Appraisal Institute in the 1980's after the savings & loan crisis. The standard provides quality control, legal documentation and standardized values for equipment appraisals performed by a qualified machine appraiser. It is typically updated every two years, with an effective date on January 1 of every even year, such as January 1, 2014 or January 1, 2020. 

How is a USPAP compliant appraisal different?

Unlike appraisals performed by an unqualified appraiser, USPAP compliant appraisals can be used in legal and financial circles. If you need to pick up used equipment and require financing from your financial institution, your bank may require a USPAP compliant appraisal be performed to verify the machinery value. Because USPAP appraisers go through a qualification process, it's assumed that they will use the proper methods to complete the equipment appraisal and that those values will hold up if there are problems with the loan down the road.

What does it require of the equipment appraiser?

USPAP controls how the appraisal is completed, but not how the equipment appraiser goes about the process. As an example, it doesn't require the machine appraiser to use a specific methodology, because an equipment appraiser who is qualified to provide an appraisal to USPAP standards already has the knowledge of what type of method should be used in that particular situation. This falls under the "Scope of Work" rule that requires the machinery appraiser to list out specific data including the kind of project, the type of property being valuated, what kind of value basis is used, the interests that are appraised, assumptions or theoretical conditions, and when the valuation is effective. With this information, the appraiser can use peer-reviewed methods to complete the appraisal.

How does it affect my equipment value?

 

Having a qualified appraiser perform a machinery valuation for you has benefits beyond just knowing what the equipment is worth. If you need to expand your business, it can act as a proof of value for financing if you need to secure a loan using that equipment as collateral. It can be used as legal documentation to support an insurance claim when you've suffered a loss and your insurance company is fighting you for every penny. It helps you keep your accounting records accurate, allowing you to know at a moment's notice what your business' exact financial picture is, so you can move quickly to take advantage of new opportunities as they become available, giving you a competitive edge over your competition.

There's no doubt that having a USPAP compliant appraisal will provide a great basis for your business to succeed, and that using qualified machine appraisers helps you secure that success against future problems. Your company's success depends on the knowledge you'll gain from the process. Why not look at what it would take to have your equipment and machinery appraised to lock in these benefits?

Tags: Equipment Appraisal, USPAP appraisal, USPAP compliant appraisal