Equipment appraisal is the independent and unbiased process of determining the value of tangible assets till a specific date. The process completes a systematic evaluation of the value and condition of your business equipment. You may ask, “Why should I do an equipment appraisal?” Well, there are tons of business benefits. The purpose of an appraisal can be financial reporting, insurance, taxation, litigation, or much more. Let’s talk in detail.
What is the Process of Equipment Appraisal?
Equipment appraisal is a process of evaluating the value and condition of your machines and equipment. The process normally follows some basic steps to ensure accuracy and reliability.
To conduct an appraisal, first, you have to choose the appraiser. The appraiser from an equipment appraisal service is the person who will evaluate your equipment. It can be a hard decision, but you should consider experience as the first priority for the appraiser because this is the most valuable thing they bring to the table.
Then, the appraiser will identify the purpose of the appraisal. The purpose will change the result and value of the equipment, so it is very important. Next, they will determine which equipments to appraise according to the purpose.
Then comes the inspection phase. In this process, the appraiser will collect all the documents of the equipment. The appraiser will personally check the equipment’s condition and consider any repair history. They will also research current market trends related to the parts of the equipment. The appraiser will also note the location, age, and use of the machine.
When all the documents are on hand on hand, they will start a valuation. Equipment appraisers use the Direct Market Comparison method. They will analyze recent or offering sales prices of the assets. Then, they will compare it with the appraisal equipment. They will also include the cost to replace this asset with a new one with the same kind of quality.
Finally, they will prepare a written report about the whole process, mentioning the methods, scopes, and the result of their appraisal. They will also mention any assumptions, limiting conditions, and qualifications they might have. The report must comply with the USPAP, a set of rules governing the appraisal profession.
Why Need Equipment Appraisal Services?
Equipment Appraisal Services are crucial to any machinery and equipment business. There can be several reasons for a business equipment appraisal.
- Insurance: In such cases, you or your insurance company may need an equipment appraisal to determine the replacement value of your items.
- Equipment Sale: If you plan to buy or sell equipment, an appraisal can help you determine the proper price.
- Business Merge or Sale: If you want to buy or sell any business, an appraisal can help you understand the worth of their current assets and the value of their business.
- Divorce: In case of a divorce, you need to divide your assets. So, you need an appraisal to determine the total value. It will allow you to divide your assets fairly.
- Litigation: If you are involved in litigation that includes equipment or machinery, you will need an independent appraisal to determine their worth.
- Estates: If you are making an estate plan for yourself or someone who is deceased, you may need an appraisal to determine the worth of the estate.
- Bankruptcy: When bankruptcy proceedings start, they will need an appraisal to quantify every asset you have.
Legal Consideration Regarding Equipment Appraisal
There are some cases where an equipment appraisal needs legal attention and consideration. Let’s look at some examples.
- When pledging collateral to a lender for financing your business, the reports of an independent appraisal need to verify the value of your machinery and equipment.
- In cases of selling equipment or entire business, the appraisal needs to ensure the terms of the deal are accurate and valid.
- When you are claiming insurance, you or your insurance provider may need to verify equipment appraisal to determine the exact value.
- In the proceeding of bankruptcy, an equipment appraiser needs to come to provide a valuation of equipment that is offered to secure the creditors.
Legal consideration is a must when you engage in borrowing, litigation, contracts, insurance claims, or a bankruptcy proceeding. You need to meet all the legal obligations in these situations.
In a Nutshell
Overall, the equipment appraisal is an important event, depending on the occasion. The process needs to be fair and unbiased. You need a proper appraiser to ensure that you get your fair value.
Especially in selling or divorce cases, an unbiased equipment appraisal is important for you and your business. So, when you appoint an appraiser, make sure they are honest and expert.
