Valuing your Equipment
Appraisals are an important aspect of the buying and selling process for used heavy equipment. They are conducted by certified appraisers who evaluate the condition, age, and other factors of the equipment to determine its current market value.
There are several types of appraisals available, each with its own unique approach and use case. This article provides general information on the following appraisal types:
- Fair Market Value
- Orderly Liquidation Value
- Forced Liquidation Value
Find out which type of appraisal is right for your current needs.
Fair Market Value Appraisal
A Fair Market Value (FMV) appraisal is used to determine the estimated value of an asset that would result from an arm's length transaction between a willing buyer and a willing seller, both parties having reasonable knowledge of the relevant facts and neither being under any compulsion to buy or sell.
In a Fair Market Value appraisal, the appraiser will consider a variety of factors, including the asset's condition, age, market demand, and comparable sales of similar assets in the same or similar markets. The appraiser will also consider economic and industry conditions that may affect the asset's value.
The FMV is typically the most common type of valuation used in many contexts, such as tax, legal, and financial reporting. The FMV is often used to determine the value of assets in estate planning, divorce proceedings, mergers and acquisitions, and other situations where the value of the asset needs to be determined objectively.
The appraisal will result in a value that represents the estimated price that the asset would fetch in a hypothetical transaction between a willing buyer and a willing seller. The FMV is often used as a benchmark to determine the price of an asset, and it is considered the most reliable estimate of an asset's value in a fair, transparent, and competitive market.
Orderly Liquidation Value Appraisal
An Orderly Liquidation Value (OLV) appraisal is used to determine the estimated value of an asset in the event that it needs to be sold in an orderly but expedited manner. This type of valuation is often used in situations where the seller needs to dispose of the assets quickly, but not necessarily under distressed conditions.
In an Orderly Liquidation Value appraisal, the appraiser assumes that the asset will be sold within a reasonable timeframe, typically 90 to 180 days, and that the sale will take place under normal market conditions. The appraiser will take into consideration factors such as the asset's condition, market demand, and the cost of removing the asset from its current location.
The appraiser will also assume that the seller will actively market the asset to potential buyers and that the buyers will have a reasonable amount of time to evaluate the asset and make an offer. The appraiser will consider the asset's value based on the price it would fetch in a well-organized and well-publicized sale.
The appraisal will result in a value that represents the estimated price that the asset would fetch in an orderly liquidation scenario. The OLV is typically higher than the Forced Liquidation Value (FLV) but lower than the fair market value of an asset, as it takes into consideration the need for a quick sale, but under more favorable conditions than a forced sale.
Forced Liquidation Value Appraisal
A Forced Liquidation Value (FLV) appraisal is used to determine the estimated value of an asset in the event that it needs to be sold quickly and under unfavorable market conditions. This type of valuation is often used in bankruptcy, foreclosure, or other distressed situations, where the seller needs to dispose of the assets quickly to satisfy outstanding obligations.
The appraisal will result in a value that represents the estimated price that the asset would fetch in a forced sale scenario. The FLV is typically lower than the fair market value of an asset, as it takes into consideration the need for a quick sale under unfavorable conditions.
How Black Star Can Help
Used heavy equipment appraisals are an essential part of the buying and selling process. By evaluating the condition, age, and other factors of the asset, Black Star’s in-house experienced, certified appraisers can determine its current market value.
Whether you’re involved in an equipment transaction, estate settlement, tax valuation, or insurance claim, there is an appraisal that will meet your specific needs.
This article is our representation of useful information and is not intended to be a complete guide for making the right decision for your company. Ask our experts - or your own - for specific advice based on your unique circumstances.