So, let's take a quick look at what's going on with Bankers and Lenders in terms of Certified Machinery and Equipment Appraisers. An interesting thing about this Certified Machinery and Equipment Appraisal Industry is we tend to be in the loop to an interesting perspective about what's going on in the Banking Industry.
When an Appraisal is ordered there are only about 20 Triggers (see my previous Blog) these follow certain trends - The Business is Growing, Restructuring, Selling, gearing up for the IRS, or going away. We rarely have happy clients and or Bankers / Lenders. So in this time of some type of transition for a Business, there are a few basic truths that should be considered when ordering an Appraisal that will save you tons of grief as a Banker / Lender or Business owner.
1. You get what you pay for - We have all heard it before, and in this industry it's alive and kicking. A client of mine had just got through paying for an appraisal when he called me and asked me to come help him out because the appraisal he got wasn't usable, I stated my price, and he looked at me funny and says "that is almost double what I just paid" Unfortunately I had to say "No, Actually it cost you his fee AND my fee to get a good appraisal". He cut me the check and said "I wish I would have hired you first" and I agreed. Our industry is full of non-certified appraisers that are causing issues and frustration. The key thought here is will it stand up if it ever needs to be in court or audited.
2. Customary and Reasonable Fees - The SBA S.O.P. 50-10 is triggering this thought process, and I am going to go out on a limb and try to explain this without everyone getting ticked off. First thing to note - reasonable and customary is relative, it's also currently not defined and changing due to some new conditions. So first you have had non-certified appraisers (usually dealers and auctioneers) throwing numbers at equipment and also coming in very low on the appraisal cost because they are making all of their money on the backside liquidating the same equipment. Second, there is no fixed price - the cost to appraise a small machine shop is not the same cost to appraise a factory - if you say it is, I say you have a hidden agenda. Third - Banks are being looked at by the FCC and Auditors and are currently phasing out non-certified appraisers and starting to use only CERTIFIED Machinery and Equipment Appraisers, Thus over the next year the average appraisal will increase in price to reflect that only Certified Appraisers who are USPAP compliant are performing the appraisals.
So let's define some basic questions to verify you have a Good Certified Appraiser.
1. Are you Certified and by Whom? There are only a few Certification Companies out there, ask for the website and research them. For instance, we are Certified by National Equipment and Business Builders Institute www.nebbi.org
2. Are you going to conduct an onsite inspection? Desktop appraisals have their place, but to really put a number on equipment and to verify it actually exists, you have to see it and touch it in person.
3. USPAP Compliant - This is the standard and ethics by which an appraiser that's certified lives. If they sound like they aren't sure - RUN, don't Walk
4. This may seem obvious, but - Are you an Auctioneer, Liquidator, or Dealer? Hidden agenda's abound here, mind you, there are definitely some good guys. But on average an auctioneers appraisal numbers will be higher due to them wanting your business and a dealer's numbers will be lowered due to them thinking you may want to sell it to them.