Used Equipment Appraisal

Are you looking for a used equipment appraisal near me? If you’re trying to determine the fair market value of equipment in California, we have five tips in this guide to help you make the process not just smooth but consistent regardless of how much equipment is involved. 

1. Understand The Common Methods of Used Equipment Appraisal

There are three main methods of used equipment appraisal: a sales comparison, cost, and income. Each one has its advantages and disadvantages. The cost approach is one of the more popular methods of appraisal. The approach is simple: what would it cost to replace the equipment in question? From there, the appraiser looks at the age of the equipment, the mechanical issues, and the obsolescence factors. 

The income approach is a little different. Instead of looking at cost, the appraiser has to use available data to come up with the current income value of the machinery in question. As you might imagine, solid concrete data on the income-producing ability of the asset is essential. 

The final method is the sales comparison, where recent sales of the specific machinery involved are used to determine the value. Each comparison requires extreme specificity to get the fair market value. 

2. Learn the Differences Between Appraisal Form Types

There are two types of machinery and equipment appraisal reports: a desktop version and a summary report. The desktop report is in-depth, but the collection of data is a different process. Indeed, the appraiser does not directly look at the equipment in question. There is no physical visit; instead, the appraiser will look at the information provided by the owner and conduct their research. 

When a Certified Machine and Equipment Appraiser conducts a desktop report, it is still compliant with all federal and state regulations. The lack of physical inspection does not change the validity of the summary report.

The summary report includes a physical inspection of the machine, independent research, and the appraiser, including the valuation of every piece of equipment listed separately. Within the document, there will also be a total valuation that includes all equipment grouped together. 

3. Understand What Impacts a Used Equipment Appraisal

A used equipment appraisal is more than just arbitrarily choosing a valuation that sounds good on paper. Instead, multiple factors come into play in terms of impacting the equipment appraisal. 

One of the most important factors that impacts an equipment appraisal would be the timing within the market. Even the most highly sought-after equipment can sit for a while if the market simply is going through a period where money isn’t circulating at a high level. A deep recession curbs purchases, as uncertainty leads buyers to wait until better market conditions open for buying to resume. 

An often-overlooked factor in the machinery and equipment appraisal process is the chain of ownership, otherwise known as the title. A clear title represents the ultimate buyer confidence; they have proof that not only does the piece of equipment exist but that you are also the proper owner. 

If the property in question is encumbered by a lien or other title issues, buying the equipment is dramatically more difficult. 

4. Follow the Process with a Certified Equipment Appraiser

When you sit down and speak with an appraiser, there are multiple steps involved in the process. For example, the formal equipment appraisal includes an engagement agreement. This is where not only the agreement to partner together on an assessment is established, but the appraiser is also building things based on the scope of work agreed upon. 

Think of the process like this: an agreement is between you and the appraiser. The appraiser is bringing their expertise to the table for you, but in turn, you are being specific about what type of appraisal you’re looking for. Most business owners are looking for fair market valuations of specified equipment. 

Everything has to be outlined property in the agreement, including the equipment that needs appraisal in the first place. A full listing of the equipment, the type of appraisal, the intended use of the appraisal, and the scope of work are all part of the agreement. 

The purpose of the appraisal comes into play on multiple levels. An appraisal from a CMEA is useful not just when you want to sell equipment but also in the event of a divorce. Having clear valuations backed by solid evidence is necessary for the judge to determine how assets should get distributed. 

5. Remember The Importance of Equipment Appraisal Services

It is important to remember that buying and selling equipment are serious events that carry serious tax consequences. In the event of an audit, documentation and expertise can make the difference between a severe tax penalty and the audit simply becoming an inconvenience. A Certified Machinery and Equipment Appraiser (CMEA) is the only qualified party recognized by the IRS. 

Discrepancies in equipment sales crop up often due to people with minimal experience in appraising equipment. Even if they professionally appraise other items, that expertise doesn’t truly transfer to machinery. 

Not going with a qualified professional opens up significant liability and risk to companies of all sizes. CMEAs are the only individuals that can offer the right documents in court and have those documents accepted in terms of evidence. If you ever have to defend your deductions or uphold your own records, having the right professional in court is extremely important. 

Having a proper appraisal also clears things up between you and the insurance companies in the event of a loss. Knowing the fair market value and replacement costs of the equipment in question gives you a solid leg to stand on if the insurance company undervalues the assets. 

In the case of equipment directly linked to income, filing a loss of use claim is much easier when you have appropriately documented an estimated income expectation from that equipment.

As you can see, learning how to value equipment is not enough, though it’s a great start. Certified equipment and machinery appraisers hold the key to not just a valuation but a document that can stand up against scrutiny.

Having a qualified third party declare the value of equipment and machinery is much better to buyers than simply accepting whatever price you’re placing on the equipment.

If you have decided to appraise your used equipment and then sell your business now or within the next six months, click here to get started with this quick and simple form, so we can understand your pain points better and prioritize your inquiry with RBS Advisors.

Go to the next article: Part of a guide to help with appraising machinery and equipment in California series ->

More Tips to Help Value & Appraise Machinery and Used Equipment in California