Why order an inspection with an equipment appraisal? An inspection appraisal aides the equipment appraiser in determining valuations through a more comprehensive collection process to obtain asset identifiers.
What scope of work is included in a machinery and equipment appraisal inspection?
In contrast to a desktop appraisal, a machinery and equipment appraisal with inspection includes a site visit and physical inspection of the “subject” property…that is, the property to be valued. For What It’s Worth Appraisals Inc. recommends an inspection to be included with every appraisal, whenever possible. Below are just a few reasons it makes more sense than gambling with the risks of desktop appraisals.
During physical equipment inspections, the appraiser typically reconciles the supplied asset list to the actual subject property on site, notating inconsistencies in the data supplied and recording additional property identifiers. Photographs are generally taken to support opinions of physical condition. By their nature, machinery and equipment assets typically are capable of being relocated. Photos can also be used to provide proof of the asset’s existence and location as of the date of the inspection.
The Importance of Asset Identifiers
Depending upon industry, equipment identification data could include: quantity, type, vintage, make, model, serial number, usage (miles, hours), capacity, dimensions, material, options, and physical condition. The equipment appraiser uses these identifiers in the appraisal process in many ways.
On site, the data is used to reconcile to the supplied asset list. Often, assets are disposed or replaced without an update to the company’s asset list. Identifiers help to clear up reconciliation issues. Physical inspections also allow appraisers to view and report property storage concerns including: inadequate storage, subject property mixed with non-subject property, visible maintenance issues, and concerns with operating or handling of property.
Asset identifiers are heavily relied upon during the appraisal process when researching equipment valuation factors. This data helps to properly match comparables to the subject property in the Sales Comparison Approach. In the Cost Approach, the appraiser uses subject asset identifiers to research replacement cost information. Prior to starting the market research, the appraiser can often verify serial numbers and VINs to confirm vintage, model, and options of the subject so that the research is performed properly.
A machinery appraisal documents the subject equipment’s identifiers, helping the client or its agents to clearly identify the subject property, as differentiated from other similar, non-subject property for purposes of: litigation, settlements, disposals, transfer of ownership, leasing, and asset tagging.
In addition to recording identification data and reconciling to the original asset list, the inspector also may record additional assets to be included in the equipment appraisal, depending upon the agreement with the client. These assets can significantly add value to the aggregate asset collection to qualify for lending threshold requirements.
The appraiser also notates any other factors of value that may affect the property by a visual check of location, storage or usage concerns, and anything out of the ordinary. These additional factors that can potentially affect value are not included in a routine set of questions that can be asked of another party, such as a property owner. A machinery appraiser relies on his/her training, education, and experience to notice these red flags that may need to be investigated further and may need to be included in the appraisal report to the client.
A thorough physical inspection by a third-party, experienced, accredited equipment appraiser provides reliable, consistent, and accurate reporting of the current condition, specifications, and location for the subject property.
Location is not an issue
At For What It’s Worth Appraisals, Inc, we have a full staff of trained inspectors located throughout the United States to provide inspection services. Through their use of state-of-the-art technology, our inspectors get their field notes to our appraiser staff with maximum efficiency, providing a fast appraisal turn-around, regardless of asset location. Click here for a list of industries that we have appraised.
In contrast to inspection appraisals, click here to learn more about desktop appraisals.
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 Circuit Court, 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.