What to Expect When Hiring an Appraiser

May 6, 2022 | Troy Clark

Appraisals are like a well-stocked toolbox, you don’t know which one you’ll need, but it’s good to be ready with the right tool. This blog will help you determine when to hire an appraiser and what to expect.

Clark Machinery Sales is a longstanding member of the Machinery Dealers National Association (MDNA) and the Association of Machinery and Equipment Appraisers (AMEA), which is the appraisal arm of the MDNA. This organization is run by highly skilled professionals who are dedicated to raising the bar of excellence among their colleagues and in the profession of appraisals. Each person certified by AMEA must meet and exceed the standards of the Uniform Appraisal Standard of Professional Appraisal Practice (USPAP).  

First: why appraisals?

Appraisers are called upon to present an opinion of value at a certain point in time. The reasons a person, company or legal process may require an appraisal can be for any of the following reasons (many of which I’m sure you have already experienced): 

  • -Review of company assets for a new or refinanced line of credit                                       
  • -Potential sale of company
  • -Anticipation of dividing a partnership
  • -Divorce
  • -IRS reclassification
  • -Corporate Restructuring
  • -Donation Values
  • -Buyout/Purchase

Second: How to choose an appraiser?

-Many will choose to hire a professional they know and are familiar with. This is a great idea as long as expectations are consistent with professional and ethical standards for all involved.

-The most important elements in choosing an appraiser are areas of competencies, certification by accountability bodies, and correct use of legally acceptable methods. There are different associations that train and enforce standards, but for this discussion we will focus on the above-mentioned AMEA.

-Choosing an appraiser certified by the AMEA means that professional is a seasoned machinery dealer, appraiser, or auctioneer. He or she knows these machines, knows their values, understands current market forces, and will capture that snapshot of value for the report. We at CMS have 3 certified appraisers on staff and welcome all inquiries

Third: what type of appraisal should I request?

-A list of appraisals can be found on our website (Auctions & Appraisals) but most businesses and lenders generally request what is called a “Market Value” (or Fair Market Value, “FMV”) appraisal. This is just what you think it is: what is the price that can be expected in an unforced environment between a ready buyer and a ready seller? And for our customers, this is the most commonly requested appraisal.

-Sometimes the customer needs to know a “worst case scenario,” i.e.: what will the collection of machinery bring if they are forced to liquidate (i.e.: auction, a date in time)? This is the second most requested appraisal that we see.

-Beyond that, each purpose can require its own unique appraisal depending on how contracts are drawn up or depreciation needs to be assessed and can be handled on a case-by-case basis.

Fourth: what is the process?

For AMEA purposes, the process is straight forward:

1. Customer provides an overview of what is to be appraised (excel doc or list).

2. Appraiser quotes the job to be performed and both parties agree on the “Definition of Value” and the “Approach to Value” (see above link to our site), and price.

3. Appraiser then submits an Engagement Letter spelling out the definition and approach, the process (in-person or un-inspected) and the price. Customer signs letter and, upon the return of signed engagement letter, the work commences.

4. Work is either performed in-person with a visit/walk through by the appraiser, or after the appraiser receives photos and descriptions digitally.

5. Generally, the time between the inspection and producing the appraisal report is between four to six weeks, depending on workload.

6. Upon completion of the formal appraisal process, the appraiser will send the invoice to customer for payment and submit the report upon receipt of payment.

    Why would anyone pay for a report they have yet to review, you ask? For one reason – to be above reproach. One of the cardinal rules in the appraisal business is to produce a report that has no bias, no agreed upon outcome of value. The final step in this process of integrity is paying prior to receiving the report.

    Finally: what should the report look like?

    The report can take many forms and all are acceptable; it can depend on the agreement between the two parties and what the customer requires for their purposes. Some can contain photos of each object appraised, some just a list. Years ago it was satisfactory to have the pre-amble and a value page, but today it is important to have information on the items appraised to erase confusion.

    Appraisals are critical tools in the flow of business and used all throughout the legal process in a variety of arenas. I hope the above has been a useful primer, and I look forward to being of service to your company in the coming years when appraisals or machinery are required.

    Have questions? Want to request a consultation for a potential appraisal? Please click here and someone from our team will be in touch.

    You may also like these articles:

    What Type of Appraisal Should a Machine Shop Get?
    How Long Does an Appraisal Take?