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Machinery and Equipment Valuation Steps

June 4, 2014

NEBBI ChecklistWe’ve blogged quite a bit about valuations and appraisals — who does them, why they’re important, and so forth — but we’ve never really broken the valuation process down step by step. So in case you’re curious, here’s how the magic happens.

Step 1: Assessment

This is where the appraiser identifies who the client is, exactly what needs to be appraised, the purpose of the appraisal, intended use, and the definition of value.

Step 2: Collection

In this step, the appraiser collects information relevant to the valuation. He or she establishes and classifies each equipment asset, and describes each by specific characteristics like serial number, manufacturer, and hours/miles.

Step 3: Application

The appraiser determines which of the three approach should be used — sales comparison, cost, or income —  and applies that to the valuation at hand.

Step 4: Valuation

Using the approach chosen in step 3, the appraiser develops an opinion of market value for the equipment.

Step 5: Wrap-Up

Finally, the appraiser will put together the appraisal report in accordance with Standard 8 of USPAP. After any reconciliations are made, the report is delivered to the client identified in step 1.

Of course, this is just a general formula and each case is unique, but it should give you a good idea of how the process works.

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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