COMMERCIAL & AGRICULTURAL REAL ESTATE APPRAISALS
Paul Hyde holds an Accredited Senior Appraiser (ASA) designation in Machinery and Technical Services (Machinery & Equipment)
Sometimes we are asked to value only the machinery and equipment for a business instead of its value as an ongoing enterprise. In these cases, picking the correct standard and premise of value is critical. Selecting the “wrong” standard and premise of value often results in a value conclusion that is misleading and may cause serious problems.
Let’s assume that a piece of equipment purchased new for $50,000 five years ago and used in a manufacturing process is being appraised. The following are various “correct” appraisal conclusions that could be reached depending on the chose of standard and premise of value:
Standard & Premise of Value
As this example illustrates, the value conclusions vary considerably. Reliance on a value conclusion performed under a standard and premise of value that is different from what is needed could cause real problems. For instance, if the machine is to be sold as part of a group in place and in continued use the value for the equipment could be $60,000 or if sold in a forced liquidation scenario, it could be worth only $25,000.
Machinery & Equipment Standard and Premise of Value Options
The following chart illustrates the options of typical combinations of standards of value and premises of value from which a selection must be made. The choice of which standard of value and related premise of value makes a substantial difference in the final conclusion of value determined under the appraisal.
We also appraisal livestock -- we have appraised dairy herds and cattle in feed lots.
Valuations play a part in all strategic transactions, tax, and many litigation matters. For additional information or advice on a current situation, please do not hesitate to call.
We value both businesses (including machinery, equipment & livestock) and real estate.
 Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets, ( Chicago : American Society of Appraisers, 2000), p. 2-4.