premise of value
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.
Equipment Appraisals: Value v Price
The purpose of an equipment appraisal drives the definition of value. For instance, when a Sacramento bank requests an appraisal of heavy equipment owned by a construction business in West Sacramento for the purposes of a collateral loan, we are likely to use Orderly Liquidation Value because that would give the lender the most accurate value on what the equipment might bring should the loan experience default.
Choosing a Bankruptcy Equipment Appraiser
When your Bankruptcy Attorney requests an equipment appraisal, it’s usually up to you to find a qualified equipment appraiser. And as you might suspect, not all machinery & equipment appraisals are created equal!
When you need an appraisal for your bankruptcy—or any other reason, for that matter—be sure that the equipment appraisal company you choose meets the four important qualifications of Accreditation, Experience, USPAP Education and Approval of your Bankruptcy Attorney.
Professional Accreditation
A professional equipment appraiser has the expertise, certification and knowledge to conduct an independent, third-party machinery and equipment appraisal. When you work with an equipment appraiser accredited by the American Society of Appraisers, you can be confident that you’ll receive a summary appraisal report with substantiated and realistic values.
Appraising Machinery & Equipment: Levels of Trade
Every Machinery and Equipment Appraiser has been asked this question –“I’ve got some equipment that I need to have appraised. How much will it cost?” And every certified equipment appraiser should answer that question by asking for more information, because not only does the cost of an equipment appraisal depend on the location, volume and type equipment to be appraised, but just as importantly, always on what kind of appraisal is needed.
Liquidation Values: Orderly or Forced?
I recently provided an equipment and machinery appraisal report on the Subject Assets of a specialty manufacturing company in the Sacramento area, using Orderly Liquidation Value, as specified. After receiving the report, the Sacramento bank for which the equipment appraisal was done contacted me, concerned that the in-house appraisal department was finding values considerably lower than those I had submitted. Turns out they were looking at figures for Forced Liquidation Value, a different kettle of fish altogether, according to The American Society of Appraisers, Valuing Machinery and Equipment, 2000:
