Whenever I am asked what I do for a living, my response
is; “I’m a machinery and equipment
appraiser” which frequently generates a look of amazement followed by the
comment; “ I didn’t know anyone did that!” Most people are familiar with real estate appraisers but are not aware
that there are a number of other appraisers out there who possess professional
expertise in a variety of areas.
Currently, there are five basic appraisal disciplines; real
property, personal property, machinery and equipment, business valuation and
gems & jewelry. Each discipline
maintains its own qualifications and standards for membership. Within each discipline there are likely a
listing of specialties. For example, machinery
and equipment has several specialties including; aircraft, computers & high
tech property, cost surveys, machinery and equipment, marine survey, mines
& quarries, oil & gas and public utilities.
Most appraisers belong to a national organization that
grants accreditations based upon one’s level of education, experience,
background including financial and personal integrity and the successful
completion of several appraisal courses and exams. Only after all these requirements are met is
the appraiser granted a specific designation in his or her specialty. Lastly, most appraisal organizations mandate
their members reaccredit every five years via continuing education in order to
assure that everyone is current with the most recent techniques and developments.
There are several national appraisal organizations
including; the American Society of Appraisers, The Appraisal Institute, the
American Society of Farm Mangers and Rural Appraisers, the International
Society of Appraisers and the National Association of Independent Fee
Appraisers, to name just a few. For the
record, I am a member of the American Society of Appraisers, which is the
oldest, and only major appraisal organization representing all the appraisal
disciplines.
There are any number of reasons why an appraisal might be
necessary, they include; financing/collateral; business mergers, acquisitions &
liquidations; charitable contributions; eminent domain, probate; property
settlement (divorce), bankruptcy; estate planning; insurance including disaster
planning and tangible personal property tax appeal.
All of these situations require differing approaches to
value since it is possible that an appraisal of the same property may result in
alternate results depending upon the purpose of the appraisal. For instance, an appraisal of an RV for
charitable contribution purposes will be vastly different from an appraisal of
the same RV involved in a bankruptcy.
What is an appraisal anyway? The industry definition is; an unbiased opinion of value. It is important to understand the reasoning
behind this definition. The appraiser
must be unbiased so as not to show any favor toward the property or the parties
involved. In addition, the engagement
can not be contingent upon any predetermined result and the appraiser can not
possess any past, current or intended interest in the property being
appraised. In short, all parties that
rely upon an appraisal must be assured that the appraiser is totally neutral.
The word “opinion” is frequently misunderstood within the
context of an appraisal. An appraisal is
not a guarantee but an indicator of the “most likely” result of a sale that
closely resembles the purpose of the appraisal. For example, the sale of a business may result in an appraisal at Fair Market
Value while a bankruptcy of the same business may conclude in Forced
Liquidation Value. In addition, the
appraiser, without interference, must be able to determine the specific
approach to value being employed. Since
this decision is the sole province of the appraiser, the result is a
researched personal opinion.
There is a large number of value concepts which appraisers
may employ with two of the most commonly used being; Fair Market Value and
Forced Liquidation Value. Fair Market
Value is defined as the result of an arms length transaction between a willing
buyer and seller while Forced Liquidation Value is the result of a properly
advertised and conducted public sale, with the seller compelled to sell on a as
is-where-is basis.
There are several factors taken into consideration when
appraising property. For example, in
order to properly value a motor vehicle, the appraiser must consider the
manufacturer, model, year produced, usage, overall condition, attachments and
accessories, market demand, obsolescence and current market conditions. This is the purpose behind the physical
inspection that is usually required prior to issuing any opinion of value.
As a result of the Savings & Loan crisis back in the
late 1980s, the US Congress formed the Appraisal Foundation in order to
establish appraiser qualifications and standards. The end result is the
“Uniform Standards of Professional Appraisal Practice” or “USPAP.” These standards have been adopted by the
federal government and all 50 states. All federal and most state agencies require that appraisers comply with
USPAP.
Whenever engaging an appraiser, it is prudent to confirm both his designation and membership in good standing with a professional appraisal organization followed by a determination of the appraiser’s expertise with the property being appraised. Your project and your organization deserve nothing less!
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