Most equipment appraisers discourage desktop appraisals. One
reason is that most folks who ask for one are making an assumption that a
desktop appraisal, since it wouldn't include a physical inspection of
the equipment, would be less expensive, or at least quicker, and
usually, it's not.
That's not to say that a desktop equipment appraisal is never appropriate. Some situations are fine for desktop appraisals; some examples would be:
It's critical, however, to be sure that the end user of the appraisal is absolutely confident that a desktop appraisal will be suitable for the use of the appraisal, and to establish that, it's important that the user--whether a lending institution, a CPA firm, a business owner, law firm, or insurance company--understand the unavoidable limitations.
Especially in the case of a collateral lending appraisal, the user needs to understand the real possibility of fraud or misrepresentation. The one situation a lending institution must avoid is extending credit on equipment that doesn't exist or isn't as represented. You'll notice that in the one desktop equipment appraisal submitted for collateral lending example above, a bank representative visited the equipment site. In other circumstances, when a deep level of trust has been built between the lending institution and the borrower, such a visit may not be necessary, but it's the obligation of a qualified equipment appraiser to stress to the client (the lending institution) that without a physical inspection of the equipment, confirming that it actually exists or is as represented is impossible.
On the other hand, misrepresentation of assets is difficult in an equipment appraisal that involves a physical inspection. It's fairly easy to ascertain, for instance, that there are, indeed, nearly 20 1995 Kenworth trucks, model 16-KW-for which you have VINs, license numbers and odometer readings-in the rolling stock inventory for a transportation fleet. A cursory glance supplies information on tire tread, paint, glass and chrome condition of the fleet, and a discussion with the mechanic in the maintenance shop provides evidence of poor, standard or regular maintenance. Collecting that information for a desktop appraisal is another matter, which is why questions 3 & 4 are important.
So is a desktop equipment appraisal a good idea? Now that you know what questions to ask, you'll have a better idea whether such an appraisal would be appropriate for your needs. In most circumstances, though, I maintain that no matter what the purpose of an equipment appraisal, the entire process--as well as the needs of the end user--is better served with a physical inspection of the property and that desktop equipment appraisals should be used in very select and limited circumstances.
That's not to say that a desktop equipment appraisal is never appropriate. Some situations are fine for desktop appraisals; some examples would be:
- Bankruptcy appraisal for a small pizza kitchen with limited, standard-issue restaurant equipment
- Amiable divorce appraisal for small farm with a small inventory of standard, well-maintained equipment
- Large trucking fleet appraisal of identical, nearly new vehicles with comprehensive documentation, complete with photos and maintenance records, for a collateral lending situation where a bank officer verified the physical inventory with a site visit
- Is timing is very short or the equipment location is prohibitively distanced?
- Is the equipment is fairly standard?
- Can I get a well-detailed asset list and excellent photographs?
- Will an authorized person familiar with the equipment be available to answer questions?
- Who is the user of the appraisal and does the user clearly understand the limitations of a desktop appraisal?
- Is the user or users confident that such an appraisal without an inspection/verification would be appropriate for the purpose of the appraisal?
It's critical, however, to be sure that the end user of the appraisal is absolutely confident that a desktop appraisal will be suitable for the use of the appraisal, and to establish that, it's important that the user--whether a lending institution, a CPA firm, a business owner, law firm, or insurance company--understand the unavoidable limitations.
Especially in the case of a collateral lending appraisal, the user needs to understand the real possibility of fraud or misrepresentation. The one situation a lending institution must avoid is extending credit on equipment that doesn't exist or isn't as represented. You'll notice that in the one desktop equipment appraisal submitted for collateral lending example above, a bank representative visited the equipment site. In other circumstances, when a deep level of trust has been built between the lending institution and the borrower, such a visit may not be necessary, but it's the obligation of a qualified equipment appraiser to stress to the client (the lending institution) that without a physical inspection of the equipment, confirming that it actually exists or is as represented is impossible.
On the other hand, misrepresentation of assets is difficult in an equipment appraisal that involves a physical inspection. It's fairly easy to ascertain, for instance, that there are, indeed, nearly 20 1995 Kenworth trucks, model 16-KW-for which you have VINs, license numbers and odometer readings-in the rolling stock inventory for a transportation fleet. A cursory glance supplies information on tire tread, paint, glass and chrome condition of the fleet, and a discussion with the mechanic in the maintenance shop provides evidence of poor, standard or regular maintenance. Collecting that information for a desktop appraisal is another matter, which is why questions 3 & 4 are important.
So is a desktop equipment appraisal a good idea? Now that you know what questions to ask, you'll have a better idea whether such an appraisal would be appropriate for your needs. In most circumstances, though, I maintain that no matter what the purpose of an equipment appraisal, the entire process--as well as the needs of the end user--is better served with a physical inspection of the property and that desktop equipment appraisals should be used in very select and limited circumstances.
Jack Young, ASA, CPA, is an Accredited Senior Appraiser (ASA) of
the American Society of Appraisers specializing in machinery and
equipment and has a Graduate Personal Property Appraiser (GPPA)
designation from the National Auctioneers Association. Jack is the
Co-Discipline Director of the Machinery and Technical Specialties
Committee and the Chapter Secretary of the Northern California Chapter
of the ASA.
For more information on machinery and equipment appraisals, visit NorCal Valuation or our equipment appraisal blog.
Article Source: http://EzineArticles.com/?expert=Jack_P._Young
For more information on machinery and equipment appraisals, visit NorCal Valuation or our equipment appraisal blog.
Your post is very interesting regarding desktop equipment appraisals .Thanks for the sharing such an knowledgeable blog with us. keep giving me updates.
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