Machinery and Equipment Appraisal
Equipment Valuation and the Myth of Auction Value
Lately, we’ve gotten a couple of calls asking for equipment appraisals at “auction value.” That’s a tough one! Auction value, you see, isn’t an appraisal value at all. USPAP requires compliant appraisals to define the value being used and to cite the authoritative source of the definition and I’ve yet to see any respected authoritative source—whether the IRS, any of various legal codes, courts, or appraisal organizations—provide a definition for “auction value.” And there’s a reason for that: Auction is a method of selling items, not a definition of value.
Considering Absorption in Equipment Valuations
The concept of absorption is used relatively often in real estate appraisal and the same concept, known as “blockage,” is a well-documented in the art valuation world, particularly in tax-related appraisals. The term “blockage” — used by the IRS — derives from issues related to selling a large block of stock and seeing the related market decline. Equipment auctioneers, whether familiar with the term or not, have certainly see the same effect when selling a high volume of similar equipment, such as a fleet of Peterbilt trucks or a yard-full of John Deere backhoes. In the equipment appraisal profession, however, absorption is often underused. Kyle Martin, Supervisory Estate Tax Attorney with the Internal Revenue Service in Oakland, California, has stated in public meetings that the underuse of blockage is one of the more common mistakes he sees in appraisals he reviews. Mr. Martin was referring specifically to real estate appraisals, but the fact is that absorption is important in many different appraisal disciplines, including machinery and equipment.
Congratulations to Bob Podwalny FASA, Lifetime Member of the ASA
As a machinery and equipment appraiser, I’m especially proud that the American Society of Appraisers board of governors has approved Robert Podwalny for Life Membership in the ASA. I was part of the nominating committee from the ASA NorCal Chapter and we were pleased to be able to make this announcement at last month’s meeting.
Life Membership is bestowed on Accredited Senior Appraisers and Fellows of the American Society of Appraisers who have, in the judgment of the board of governors and the member’s chapter colleagues, made outstanding contributions to the Society and the valuation profession. Bob’s long and outstanding service, like that of other Life Members, has contributed to the growth and development of the Society and has helped elevate the status of the profession among users of appraisal services.
Equipment Appraisals for Insurance Claims
Equipment appraisals for insurance claims come in two categories: the equipment owner may need an equipment appraisal to engage with the insurance company, or an insurance company may request an equipment appraisal for fulfilling a filed claim. In both of these cases, standard operating procedure is to call the equipment appraiser after the damage has been done.
Scope of Work for Equipment Appraisals
As a Sacramento equipment appraiser, I can verify that defining the scope of work is a critical first step in any appraisal process. Even before quoting a priceon an equipment appraisal, we need to closely define our scope of work. Scope of work is defined by our friends at USPAP (Uniform Standards of Professional Appraisal Practice) as the type and extent of research and analyses in an assignment, and USPAP states in no uncertain terns that is the appraiser’s responsibility to determine and perform the appropriate scope of work.USPAP’s Scope of Work Rule states that an appraiser must
Equipment Appraisals: What about Desktop Appraisals?
Like most equipment appraisers, I generally discourage equipment desktop appraisals. Most folks who ask for one are making an assumption that a desktop appraisal, since it wouldn’t include a physical inspection of the equipment, would be less expensive, or at least quicker, and usually, it’s not.
That’s not to say that I never do a desktop equipment appraisal. Some situations are fine for desktop appraisals and I have some examples of these in my records:
- Bankruptcy appraisal for a small pizza kitchen with limited, standard-issue restaurant equipment
- Amiable divorce appraisal for small farm with a small inventory of standard, well-maintained equipment
Construction Equipment Appraisals in the 21st Century
Construction equipment appraisals are a staple in our business, so I was interested to run across an article in the September issue of MonitorDaily reporting that values of used construction equipment have been on the rise for most of this year. This corresponds with what I’ve been noticing in values for construction equipment appraisals this year, from an excavator company in March, a crane rental company appraisal in May, a swimming pool construction business in June and, most recently, an Oakland commercial construction company in early August:
Equipment Appraisals in San Francisco? Yes, Indeed!
It’s true that there’s not a lot of farming equipment in downtown San Francisco, but that doesn’t mean that San Francisco is an equipment-free area! Look around next time you’re in the Bay Area & notice the plethora of construction equipment, for example. More than a few of the companies involved in building & rebuilding San Francisco are actually based in the city, not only general contractors, but evacuators, equipment rental companies, water work specialists, and transportation services as well as concrete and paving experts. Maybe I’m nuts, but spending a day or 2 in San Francisco inspecting construction equipment or rolling stock sounds like a good time to me.
