What is a Desktop Appraisal?
An equipment or inventory desktop appraisal is a limited scope appraisal that does not include a physical inspection of the assets. Instead, the appraiser relies upon information provided to her by other parties regarding the subject property.
There is a place for the desktop appraisal
Machinery and Equipment appraisal is unique in that the subject assets can be dispersed across thousands of miles. Even though the scope of work and reporting is limited, desktop appraisals are useful for some applications. Ideally, a desktop appraisal can be performed if the asset list has sufficient property descriptions identifiers. A test for sufficiency is whether these identifiers provide enough information so that the machinery valuation specialist is able to find data in the marketplace to properly consider the standard approaches to value.
Desktop machinery appraisals can also be useful to value assets in hypothetical scenarios. For example, a desktop appraisal can be used to value a plant that has not yet been built or completed.
While not technically a desktop appraisal, partial reliance on other asset data may be used and assumed to be consistent. For example, it is rarely economically feasible for a truck fleet company to have all of its assets at one inspection location. Even if the majority of assets are parked in a few locations, there always seems to be a few trucks on the road and unavailable to view for the inspection. In this case, an appraiser would make assumptions about the assets not present during the inspection, such as assuming similar odometer readings for similar vintages. Or the appraiser may collect company-reported odometer readings for these assets, causing the appraiser to make assumptions that the second-hand reported data is true.
When a desktop appraisal is the only choice
In some instances, the assets are not available for inspection. This could be for a number of reasons, such as: inaccessibility, in transport, theft, fire, prior disposal, already donated (i.e. charitable contribution appraisal), or if one of the parties is refusing access. If the assignment requires a retrospective effective date, it is possible that a combination of these and other issues may necessitate a desktop appraisal.
Below are some cases where a desktop appraisal may be sufficient for determining values:
- Internal company audits where the data is from a trusted source
- Truck fleets with the majority of assets being continually mobile, in various locations
- Companies with small quantities of assets, but that have detailed asset listings and photos
- Retrospective valuations of asset disposals
- Appraisal updates when hiring the same appraiser
- Partial inspection when multiple locations contain similar assets
What’s your risk tolerance?
When should you order a desktop appraisal rather than an appraisal with inspection? Ultimately, this answer depends upon the client’s risk tolerance and the appraiser’s ability to perform the valuation with the limited data available. If the valuation is for internal company use, the risk may be quite low. However, when another party is involved, such as in an exchange of ownership or tangible personal property tax appeal, a desktop appraisal may be challenged whereas an inspection appraisal is more traditional. As a general rule of thumb, if your appraiser will need to testify to defend the valuation, it’s recommended to do a full scope appraisal.
For What It’s Worth Appraisals, Inc would like to help you with this decision. We also provide appraisal expert witness services. Contact us today!
About the Author
Tammy Blackburn, ASA is an Accredited Senior Appraiser with over 15 years of experience performing Machinery & Equipment appraisals and Inventory valuations. As an expert witness, Ms. Blackburn has defended her appraisals in Federal bankruptcy court and in Value Adjustment Board hearings. Having served 7 years as a Special Magistrate in 10 counties for ad valorem Tangible Personal Property, Ms. Blackburn is uniquely qualified to perform appraisals to be used for establishing taxable value.
