Why Hire a Machinery and Equipment Appraiser?
If you are not a banker, attorney, or in insurance, you almost certainly do not think much about the need for or value of a Machinery and Equipment Appraiser. Even if you are an entrepreneur, unless you are prolific in starting or liquidating capital-intensive businesses, you might very well only use a Machinery and Equipment Appraiser once or twice in your life. As an individual, it is even less likely that you will have hired or even heard of a Machinery and Equipment Appraiser, and even if you are familiar with the title you may not be fully aware of what they do and how they can be valuable in a wide range of business and personal scenarios. Don’t worry! This article is here to clear up what Machinery and Equipment Appraisal is, why it is useful (and at times absolutely necessary), and explain how USAA can be of service if you are looking for a professional, fast, and reliable source to appraise your or your company’s assets.
What is Machine and Equipment (M&E) Appraisal?
Machinery and Equipment Appraisal is the process of determining the value of physical assets, excluding real estate which has its own specialized field of appraisal, most often in a business setting. The range of equipment and assets an M&E Appraiser may value during the course of an M&E appraisal is vast: from farming and construction equipment like tractors and excavators to the oftentimes custom machines that may be found in a metal machine shop to simply the computers, phones, desks, and conference tables in an office building. Any physical asset outside of real estate and its fixtures is in the realm of what an M&E Appraiser may value. In some cases an M&E Appraisal may be part of a larger overall Business Valuation, a process by which the value of a business is determined based on the revenue it produces and liabilities it holds, but An M&E Appraisal may also stand alone in many cases as well. Common reasons for an M&E Appraisal include determining the value of the assets a business possesses when they seek to use those assets as collateral for a loan when expanding, determining the value of equipment that needs to be insured so that the owner is properly compensated in the event it needs to be repaired or replaced, or the sale or liquidation of a business.
It is worth noting that Machine and Equipment Appraisers are not limited to working with businesses and are also called upon to use their expertise in the service of individuals as well. As experts in valuing assets, an M&E Appraiser might be contracted to determine the value of a collection of anything from art to baseball cards before an auction takes place or an insurance policy is taken out or cars, jewelry and other valuables that may need to be divided in the proceedings of a divorce. With all the information available to us online these days, you may wonder why you need a professional appraisal. This is a valid question, but the answer is very simple.
Why Do I Need a Professional Appraisal?
Whether or not we realize it, we are all estimating value all of the time. Going to the store we typically have an idea of what our shopping list is going to cost us, and ‘sticker shock’ is that all-too-familiar phenomenon when our expectation (conscious or unconscious) proves to be wrong in an unfavorable way. We value things that are less concrete as well. Weighing the cost (in time or money or opportunity) of going on a trip or taking a class that may not leave us with anything tangible but still have worth to us as experience is a value question at its core. As individuals, we probably get closest to the work an Machinery and Equipment Appraiser does when we are making the biggest purchases in our lives: houses and cars.
At a grocery store we would not think about what a bunch of bananas will be worth in a couple of weeks on a resale market and people most commonly buy electronics expecting to use them until they either break or become obsolete, but we typically do consider which direction the price of a home or car is likely to go and how quickly it will be moving before we sign for a mortgage or auto loan. Because homes and cars are more often purchased used than brand new, we often look at condition, age, and the sale price of other comparable options as an essential part of determining if we are getting a fair deal or not, and this is a lot like the work of an M&E Appraiser. Appraisers look at an asset and determine its value based on how much it cost new, how much useful life it has left, the condition it is in and its maintenance records, the price that similar items have been selling for, amongst other factors. But if we are all constantly engaged in one way or another with valuation, what is the purpose of hiring a professional M&E Appraiser? The answer is quite simple. The difference between hiring a professional Machinery and Equipment Appraiser and trying to determine a value yourself or simply getting the opinion of someone considered to be ‘in the know’ is essentially two-fold: training and legality.
M&E Appraiser Training
A professional Machinery and Equipment Appraiser will hold a designation such as CMEA (Certified Machine and Equipment Appraiser) from NEBB Institute or one of several MTS (Machine and Technical Specialties) accreditations from the ASA (American Society of Appraisers) that indicates that they have been trained in the art of valuing assets of all types in a way that they can support with both experience and evidence, that much will come as no surprise. What is equally important that you may not consider immediately is that they are also trained in ethics and the best practices of the industry that are extremely important in making sure their valuation stands up to scrutiny. While there are a handful of institutions that are able to certify an M&E Appraiser and provide the certification needed to operate in the field, all of the education should be guided be in accordance with USPAP (Unified Standards of Professional Appraisal Practice). USPAP establishes the standards by which all professional appraisers should operate and whose changes they are required to be continually educated on in order to maintain their legal standing and professional integrity.
The training an appraiser receives through the credential-issuing institutions that covers the various methods of determining a defensible value is important for accurate M&E Appraisals, but the portion of the training regarding ethics is what makes professional appraisal so valuable. We can all agree that we have a tendency to value what is ours higher than we might value something that we do not own, and this is logical. We of course want to sell what we have for more, on top of sentimental value skewing our thoughts at times, and we want to spend as little as possible to get what we want or need. This presents both accuracy and ethical concerns, and this is what a professional 3rd party Machinery and Equipment Appraisal eliminates. Whether it is a business valuation, insurance valuation, or part of the process of a loan application, the appraised value of an asset means little if it is not backed by a professional. We may have a friend who is a mechanic with many years of experience tell us what they think a car is worth and trust that opinion, but the lack of accepted professional methodology as well as inherent ethical concerns when dealing with someone who may have a vested interest in the value render that sort of informal appraisal effectively useless in almost all situations. The temptation on the side of a client to seek a predetermined or inflated value that best suits their interests is also eliminated by contracting a professional 3rd party Machinery and Equipment Appraiser. This is the crux of what makes professional appraisal trustworthy for a bank, insurer, attorney, or court of law and thus provides its value.
Legality
If the valuation of an asset will not stand up to legal scrutiny, it is as good as non-existent for use in insurance, business sale or liquidation, or any situation which sees the appraisal examined by the courts. You could have your most knowledgeable acquaintance, someone with tons of experience working with or even buying and selling a certain type of asset, tell you that what you have is worth $50,000, but this does not mean that is what an insurance company will give you as a replacement value should a disaster strike. The opinion of a certified professional in the same situation, however, will give you solid ground to stand on and the comfort of knowing that the valuation is defensible should you need to rely on it. Most situations where an appraisal is necessary can have serious legal and financial implications if the appraisal is not done correctly by a certified M&E Appraiser.
It is not hard to imagine how a lawsuit might come up if, in the context of a business valuation, the value of the selling company’s assets is grossly overstated and inflates the price the purchaser pays. In divorce proceedings, the prevailing value will be no surprise if one party submits a list of assets whose assets they have estimated on their own and the other provides a professional appraisal of the same list of assets. Wouldn’t we all be rich if we could walk into a bank and tell them that we would like a loan issued to start a business with our childhood blanket used as collateral, valued at millions of dollars by none other than our mothers? In any situation where the value must be accurate and could be called into question in legally, it pays to make sure a certified professional handles your Machine and Equipment Appraisal.
Professional M&E Appraisal reports are required to disclose any connection the appraiser has to the assets being valued and also knowledge gaps the appraiser had going into the appraisal. This disclosure establishes the appraiser as a trustworthy source of valuation. A good appraisal report will also include industry trends and market comparisons that back up the numbers and attest to the accuracy of the appraisal. Importantly, a professional M&E Appraisal can also limit who the appraisal is for and thus its possible uses which is key to eliminating outside influence. These factors as well as the appraiser putting their reputation and professional integrity on the line make these appraisals reliable enough to be used in legal contracts.
US Asset Appraisals
US Asset Appraisals bring over 25 years of appraisal, valuation, and auction experience to the table. Our staff of four appraisers with professional credentials guarantee our appraisals reports will stand up to any amount of scrutiny. We pride ourselves on providing accurate values more quicker than our competition and with a commitment to service that will make sure all your questions and concerns are attended to. Whether you work in banking, insurance, law, or business, or even need appraisal for personal property, it would be our pleasure to speak to you. We have a team equipped to handle all aspects of business valuation, equipment and machinery appraisal, and even broker sales and handle auctions. Whether a first appraisal or second opinion we can assure you we can provide service quickly and professionally at a fair price. Feel free to contact us for a quote at any time and see the difference we can make!
