How to Hire an Equipment Appraiser!
Our Answer: Step 4 – Hiring the Appropriate Appraiser
Note: Nobody knows your equipment like you do. Nobody knows every piece of equipment. A good equipment appraiser is hired because they can effectively find what it’s worth and help you in setting the right value – not because they can be your mechanic. Many people new to appraisals confuse this.
Pay very close attention here – this one portion can effectively kill your defense in court, your ability to get the loan, or cost you a mint in taxes.
You may be tempted to hire a Buddy, a Local Auctioneer, A local Dealer, or the like. Don’t Risk It! 95% of these types of appraisals are not Certified, Not Court Tested, and are considered Biased. You show up to court with a “buddy” appraisal and a true certified appraiser will make him look like a fool – which equals YOU LOSE!
The best scenario here is to hire an out of area (at least 1 county over) certified equipment appraiser like a Master Appraiser at Expert Equipment Appraisal that is knowledgeable with your type of equipment, court rooms, and who will write a true certified report. As a matter of fact I would choose an appraiser that writes rock solid reports over one that knows your specific equipment. The reality is finding and applying prices on equipment is a whole different discipline than working on a tractor or machine (you don’t need to know how the engine runs to drive the car). NOTE: Many times you will not be the client – but rather the bank, attorney, etc should be – your appraiser can guide you here.
Key things to consider on types of Appraisers:
Certified vs. Non-Certified – An important thing to know about your appraiser is their certification level – this usually also goes hand in hand with if your report will be compliant or not. In the past you could call on Bubba the local auctioneer or dealership to write an “appraisal” for you that would give you a general value. Many times an auctioneer “appraiser” may even ask you what you want him to write – He’s not liable YOU ARE. I know for a fact 99% of the time the local dealer is going to lowball the number for fear you may actually decide to trade it in. Note: Only by hiring a Certified Machinery & Equipment Appraiser can you be assured you are getting the most compliant and highest quality report.
Appraiser vs. Accountant / CPA – Some companies will just ask their accountant to write a machinery appraisal. Note: While some accountants are certified machinery appraisers MOST are not. Note: Depreciation Value does not equal Market Value and many CPA’s / Accountants are only going to give you depreciation value on your equipment. So ask yourself “just because my depreciation schedule has run out, is my machinery worth $0.00?” Accountants generally look through the lens of IRS compliance and while in some settings this is the proper way to do a machinery appraisal – it is not the way anyone else will see it.
Appraiser vs. Internal Employee – This is a very easy one. When an employee writes an appraisal they have the best interests of the company they are working for in mind. Internal appraisers at banks, insurance companies, or even your company are BIASED or at least everyone else thinks they are.
Auctioneers and Dealers – In most circumstances the “appraisers” in these fields have a hidden agenda, do not use market data, and typically are not truly Certified or Complaint –
Tip: Most Auctioneers, Dealers, and Accountants are NOT CERTIFIED!
Tip: Dealers and Auctioneers usually have hidden financial agendas and a Dealers Trade In Value is not valid in the appraisal world (there are to many variables that a Dealer can manipulate unless the dealer is willing to give you their cost, their markup, their finance markup, Etc. – Full Disclosure).
USPAP Compliance (Uniform Standards of Professional Appraisal Practice) – This is the Industry standard for Compliance, Ethics, Approaches to Values, and any other knowledge an appraiser must have to create a report that will withstand scrutiny, be irrefutable, and be compliant with the IRS , SBA, Courts, and most other organizations. Make sure your appraiser is familiar with USPAP and their report is USPAP compliant
Step 5 – Interviewing the Appraiser – Questions to Ask
Note for the Attorney – These are great questions for a court room.
Here are the questions (and what we say in answer as example) you should be asking to verify if an Appraiser is Certified or not.
1. Are you Certified? By who? Do they test? What Designations do you hold?
(A. Primary Certifying entities in America are ASA, NEBB, CAGA, AMEA, there are a few others but make sure they are a valid certification not just an auctioneer group – USPAP compliance usually is the dividing line protocol – We have a MCMEA Master Certified Machinery and Equipment Appraiser Certification from the NEBB Institute.
2. What is your Appraisal Education back-ground? What experience do you have with this type of equipment?
(A. Look for valid appraisal background not just equipment buyer / dealer / auctioneer)
3. Can you meet my deadlines? How long will the process take?
(A. Depending on the size of the business our Site visit takes a few hours to a few days and our report is usually done within 5 days after that.
4. Are you USPAP Compliant?
(A. Uniform Standards of Professional Appraisal Practice – Appraisal Guidelines as Promulgated by Congress – sections 7 and 8 apply to our discipline)
5. What Approach to value do you take and is it documented?
(A. There are only 3 that possibly apply here – Market Data Approach, Cost Approach, and Income Approach)
6. What value level will you be appraising at?
(A. Fair Market Value, Orderly Liquidation Value, Forced Liquidation Value, Etc..)
7. Where will your market data be taken from.
(A. Regional is best – I.E. Multi State to get a better cross section of the true market without having to pull values from too far out – a person can reasonably buy a piece of equipment from a nearby state and have it delivered within reasonable delivery fees. Local only does not give a True Picture in today’s market.)
A Certified & Professional Appraiser will easily be able to answer these questions and more.