Equipment Appraisals: Be Wary of "Unqualified" Appraisers

Before I get too far, let me explain what I mean by "unqualified." This is not meant to say that any particular appraiser is not knowledgeable about the property he or she is appraising. Rather I am concerned about the absence of a neutral third party organization that has examined and tested the education, knowledge and experience of the appraiser and has been granted a certification based upon those qualifications. In addition, all appraisal organizations require recertification every 3-5 years in order to insure that the appraiser has kept up with continuing education and other related changes within the appraisal profession.

Real property appraisers are state licensed so one may reasonably assume that their qualifications have survived scrutiny. However, appraisers of tangible personal property are not state licensed. Tangible personal property is best described as; machinery and equipment, residential contents, fine art and collectibles, antiques and gems & jewelry. There are other specialties in personal property too numerous to mention here.

It is important for clients as users of appraisal services to understand that the engagement of a "qualified" appraiser is of the utmost importance, especially with the passage last year of the Pension Protection Act. This act contains definitions relating to a qualified appraisal and qualified appraiser and stipulates requirements for both as well as government action for any mis-statements of value performed by an appraiser.

For example, Company A is buying Company B and requires an appraisal of the tangible property assets for "purchase price allocation" which will be used as a basis for a new depreciated asset listing. The depreciation list is subject to IRS review and in an audit one of the first items reviewed is the qualifications of the appraiser. At this time, the IRS recognizes only appraisers with designations from the American Society of Appraisers (ASA). This is because IRS personnel have audited ASA courses and recognize them as superior. According to several IRS auditors I have met, they will not accept a personal property appraisal not performed by an ASA appraiser.

I recently reviewed an appraisal performed by a local appraiser for a small medical clinic. The appraisal report was brief and only provided the fair market value, a property description, the respective value of each asset and a summary of qualifications.

I was awed by the absence of what was not included; the definition of fair market value, the approach to value employed (Income, Cost or Market), detail of the research performed to arrive at the value result, any limiting conditions, property condition, scope of work and remaining useful life. Of particular note; his qualifications failed to mention any education, degrees or certification earned. All of these absences are required by the Uniform Standards of Professional Appraisal Practice (USPAP).

It is no wonder that the client sought a second opinion given the unprofessional nature of its presentation. Of particular note, the property was inadequately described with serial numbers absent. This appraisal would not stand up to any type of scrutiny, be it IRS or legal due process.

There are any number of "appraisers" available who may in fact be knowledgeable about the property they are appraising. However, it is prudent to employ someone whose work and qualifications have been reviewed and adhere to the all governmental requirements.

Both you and your organization deserve nothing less!!!