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Reading an Appraisal Report

November 20, 2013

We talk a lot about seeking out the best appraiser so that you get the best appraisal report — how finding a CMEA is important so that your report will stand up to scrutiny. But once you get that report, what do you do with it? How do you read it? Sure, you can just flip to the value determined, but it’s helpful to be better informed and more involved in the process.

One way to get involved in the appraisal report process is to ask your CMEA to show you a draft of the report. That way, you can clear up any misunderstandings before the report is finalized. Make sure you can understand the report, that the table of contents is clear, and that the report is grammatically correct. Take a close look at the definitions of value and the methodology used. As you read through these sections, make sure that the definitions and methods your appraiser used make sense to you. If not, asking questions is completely appropriate. Next, take a look at the subject assets section. This section will describe the items being appraised and their condition. If the intended recipient of your appraisal report wants more detail than the appraiser provided, the draft stage is a good time to ask for that detail. The next section to look at is specific market considerations. This will not come into play in every report, but sometimes, the equipment or machinery being appraised can be affected by market conditions. Changing market conditions or regulations, or an influx of inexpensive machinery from overseas, can affect the value of your equipment. Look closely at this section of your report and discuss it with your appraiser if necessary.

It’s nice to be able to trust the experts, but you’re the expert in your business and you know how you’ll be using the appraisal report. By making sure the report you receive meets your expectations and contains the elements you need, whether you’re using the report to get a loan, make a purchase, or make a sale, it’ll go much more smoothly.

The NEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

By: NEBB Institute


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