Our Answer: Negotiating the Appraisal Fee / How much to pay:
Fees come in all shapes and sizes with appraisers. Most Certified Appraisers can give you a free quote when you supply them with a solid asset list or depreciation schedule. We cannot speak for everyone but here are some of the fee structures we have encountered and used. Remember in a litigation situation you will almost always need a site visit for solid court defense.
1. Hourly - Definitely the most expensive - Gets your ducks in a row before you hire this way and try to negotiate a flat fee instead. Hourly costs range just like an attorney - we have seen $50 to $150 (ours) to $250 and up. When we are in a setting with no information we generally try to gauge based on a half day rate of $600 and that seems pretty average. So for instance I need to visit your shop (1/2 day), Research your Equipment (full day), write the report (1/2 day) - You would have a $2400 appraisal. Based on the National average we have seen appraisals run about $2900 - $3500 with lows in the $600 range and highs in the Hundreds of Thousands.
2. By the Item - Most Times Appraisers will quote or at least consider how many items they specifically have to research and report on. Some different government agencies can be used for a guide here. The IRS hints at (but never outright says) equipment valued at $2500 and up should have its own line item in the appraisal. The SBA mentions $5000 and up. I have seen this be very dependent on how much equipment the company has and the type of equipment. Items below this amount fall into support, furniture, or electronics and are generally appraised in bulk with industry depreciation metrics. We have seen the per item cost range from $35 to $250 a good national average may be $75 - $100 in the Midwest and $95 to $125 on the coasts.
Flat Rate - The appraiser takes everything into consideration and quotes a flat rate fee. This is a good way to hire if you have given a good asset list to the appraiser.
Note: Remember that preparation for court, depositions, and actual court time are generally billed separately. Yes you can simply subpoena your appraiser and not pay him - but remember you want this guy as an expert witness on your side and the small fees will reap HUGE rewards. Note: An Appraisal must be paid for BEFORE or AT the time of delivery to be considered unbiased. This eliminates the other side from saying you held any sway over the appraisers values by withholding money.Things that impact the fee are:
Preparation by You – Spending a few hours using tips from this book can make a massive cost savings difference on your appraisal.
Locations(s) – Where in the world is the equipment and will the appraiser need to do a site visit(s), buy plane tickets, etc.
Type of Equipment – It is harder to appraise custom machinery or industry unique machinery than it is to appraise a truck there are thousands of for sale at this moment.
Type of Appraisal – On-site vs. off-site appraisals affect the cost greatly.
Use of Appraisal – An appraisal that is going to be used in the courtroom has a higher price than one going to be used for accounting purposes.
Appraiser Pedigree – Interestingly enough although appraisers with lots of credentials look good on paper. Sometimes that only means they are more expensive and not more qualified. This is a tough one to gauge for the average business owner. Choose wisely!
Let us give you some basic tips to keep your costs down. Fee Tip 1. Have that perfect asset list ready (see the section) and make sure the appraiser knows about it, and is willing to discount because of it. Also request the appraisal company you feel comfortable with. Fee Tip 2. Hire an appraiser that has national reach. We have strategic alliances with appraisers across the nation that will do our site visits and therefore lower your costs by eliminating travel fees. Fee Tip 3. Know if you can use a desktop appraisal or need a summary appraisal. As we mentioned earlier this can save thousands in cost. And generally there the only real difference is if the appraiser physically sees the equipment. Remember that Litigation or a Bad Asset list tends to push the need for an on-site visit.Fee Tip 4. Don’t be fooled by fancy titles. Make sure to ask the questions mentioned in the previous section. And yes we do have those same fancy titles but frankly we don’t take ourselves that serious – we were raised blue collar and have worked around machinery all of our lives.Fee Tip 5. It is very important to remember that for a report to be in compliance you will have to pay for it BEFORE or at the time of delivery. The appraiser usually will ask for half up front and half at time of delivery – This is Normal.Fee Tip 6. Be sure when you sign the engagement agreement you note what extra charges may be if more equipment is found while on-site. We have seen instances where they gouge you for double their normal rate. Fee Tip 9. Line Item Count: Not all items on your Asset list need to be appraised individually - This is a personal decision in many respects. Certain Government agencies dictate everything $2500.00 and above needs to be a separate line item on the appraisal, the SBA (Small Business Administration) recently dictated $5000.00 as the minimum bottom threshold. When in doubt about the appraisal threshold, please default to $2500.00 or a lower amount. As for small items, furniture, and electronics, you can enter all of these separately or as a batch dollar amount and we will apply industry depreciation metrics to them at a very minimal cost.Fee Tip 8. Shameless Advertisement Here – We have decided that a Flat Rate based on Items, Hours, and Travel has worked the best for us and our customers – NO SURPRISES THAT WAY.