As a Certified Equipment Appraiser I am often asked many questions about the process of appraisals and why so much detail is needed about who is using the appraisal, and why they are getting the appraisal done.

Questions like;

  • Why all the fuss about appraisals? Just give me a number.
  • Isn't there just a "Value" for my equipment, you're making it harder than it needs to be? 

When looking to have your assets, including equipment and machinery, appraised, it’s important to understand that there are several different types of appraisals, each developed with a different approach for a specific purpose. The type of valuation used for a CNC machine in an active fabrication or machine  shop, for example, may be very different from the approach used for surplus equipment being liquidated, or machinery being used as collateral for financing.

These distinctions matter because lenders, insurers, buyers, sellers, and even tax authorities rely on different appraisal standards and definitions of value. Choosing the wrong type of appraisal can lead to inaccurate expectations of resale value, problems with financing, or compliance issues during audits.

In this article, we will outline the primary types of machinery and equipment appraisals, explain why each appraisal type exists, and show you how to select the right one for your specific needs—whether you’re planning to buy or sell a machine, secure a loan, support an internal asset review, or document fair market value for strategic planning.

Who Is The Intended User?

Values on anything are determined by who is looking for that value and for what purpose. A single piece of equipment can carry very different values depending on the intended user and use case. For example, a CNC machine in operation on a shop floor is valued vastly differently by the shop owner—who considers its productivity, accuracy, remaining service life, and impact on throughput—than by a scrap dealer, who is primarily concerned with recoverable metal weight and salvage components. In the same way, a lender, an insurer, or a liquidation buyer will each view that same CNC machine through a different lens, applying different assumptions and appraisal standards to arrive at their own definition of value. 

Determining the intended user is the first step in approaching the appraisal from the right direction. 

What is the Purpose for the Appraisal? 

Obviously appraisals are needed for a variety of reasons including Asset Based Financing, Acquisition of Assets, Merger of Assets, Bankruptcy, Divorce, Estate Planning, Bond Issues, Insurance Purposes, Equitable Distribution in conjunction with business planning purposes or business decisions, etc. In each of these scenarios, different stakeholders—lenders, courts, insurers, buyers, sellers, and internal management—are relying on the stated value to make material financial and operational decisions.

Because of this, the specific purpose of the appraisal will heavily influence the standard and approach to value. An appraisal prepared to support asset-based lending, for example, may focus on orderly or forced liquidation value to determine how much a bank can safely advance against your machinery. An appraisal for insurance, on the other hand, will concentrate on replacement cost new or replacement cost new less depreciation to ensure the equipment can be properly repaired or replaced after a loss. In merger, acquisition, or estate planning situations, you may need fair market value in continued use to accurately represent the economic contribution of the assets to an ongoing operation.

Understanding why the appraisal is being requested—and how the results will be used—is critical, because the same press brake, laser, or CNC machining center can appropriately carry very different values depending on whether the driving purpose is financing, litigation, tax planning, internal allocation of assets, or risk management.

Definition of Value 

After all that we still need to define WHAT value we are appraising for. We understand that the Definition of Value is different when appraising an asset in place with assumed earnings versus another asset being appraised for forced liquidation value (auction). Same equipment, same place, same time, but different values driven by different assumptions. Lets look at some values that can be vastly different:

  • Market Value - Fair Market
  • Market Value - In Place
  • Market Value - In Place w/continued use
  • Forced Liquidation Value (Auction)
  • Orderly Liquidation Value
  • New Replacement Cost Value

When an asset is valued in continued use, the appraisal assumes the machine is installed, powered, maintained, and contributing to an active operation. In that scenario, factors such as current and projected earnings, production capacity, accuracy, remaining useful life, and the cost and risk of replacement all influence the conclusion of value. The question becomes: “What is this machine worth to a buyer who intends to keep it in productive service?”

By contrast, a forced liquidation or auction value assumes a compressed marketing period, limited buyer exposure, and a seller under compulsion to sell. Under those conditions, potential buyers discount for removal, rigging, transportation, uncertainty about condition, and the lack of time for thorough inspection or financing. The question then shifts to: “What would this machine likely bring at a publicly advertised auction under forced-sale conditions, net of typical marketplace realities?”

Both conclusions may be correct for the same CNC machine, laser, press brake, or waterjet at the same moment in time, but they serve very different purposes. This is why clearly defining the specific standard—or Definition of Value at the outset is essential to developing a credible, defensible appraisal that aligns with how the value will actually be used.

Typical Appraisal Scenarios

Since there are differing approaches to value that result in vastly differing results, these are used and needed for differing reasons. As exampled below;

  • Fair Market: Typically used by Insurance Companies, Equipment Buyers, Tax Assessors, Legal/Estate Purposes
  • Market Value - In Place: Typically used for Internal Asset Valuation, Insurance Values, Dissolution of Partnerships/Divorces
  • Market Value - In Place w/continued use: Typically used when looking to valuate a company to sell.
  • Forced Liquidation Value (Auction): Typically used by finance companies/lenders, attorneys and courts in situations where assets might be sold in a distressed state.
  • Orderly Liquidation Value: Lenders & Other financial Institutions for risk assessment and collateral review
  • New Replacement Cost Value: Typically Used by the Insured and Insurance Agents to determine adequate coverage values.

As you can see, there are many types of appraisals designed to match a specific intended user and a specific intended use. Not every appraisal is the same—nor should it be—because each one is still an informed “opinion of value” that must be developed under the appropriate standard, for a clearly defined purpose, and with defensible assumptions. A credible machinery or equipment appraisal draws on detailed research of the active marketplace, broader economic conditions, replacement and installation costs, comparable sales, asset condition, remaining useful life, and many other operational and financial factors.

When performed correctly, this process produces a value conclusion that is not only technically sound, but also meaningful and usable to the party relying on it—whether that is a bank evaluating collateral, an insurer setting coverage limits, a buyer or seller negotiating a transaction, or an owner planning for succession or strategic growth.

When you need your next equipment, asset or whole plant appraisal make sure you're appraiser is asking the right questions as to who is the intended user, and what is the intended use for the appraisal to ensure your getting an appraisal completed focused on your goals. And as always, only use an appraiser who follows the practices of the Uniform Standards of Professional Appraisal Practice (USPAP) such as our staff of Certified Equipment Appraisers from the Association of Machinery & Equipment Appraisers.

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