Real Values EQUAL Real Money

Who you choose to do your Machinery and Equipment Appraisal can have a drastic effect on the amount of money you can borrow from the Bank / SBA or have to pay the IRS.

Let me show how Appraisal Methods change the Values.

The Cost Approach to Value: If an appraiser uses this method it means that he uses only new purchase price and then figures depreciation at that moment.

Case Study: A New Dozer costs $100,000 – yours is 10 Years old with average hours. The Cost approach says its worth $15,000. Reality says there are 50 for sale right now on the internet that are from $32,000 to $37,000. The Bank Then cuts that number in half hedging their bet against possibly having to sell it if you fail. You just lost About $10,000 worth of Real Money that should have been yours to borrow, plus risk having to pay for another Appraisal.

Case Study: The New Dozer costs $100,000 – Yours is 5 Years old with average hours. The Cost Approach says its worth $72,000. Reality says there are 50 for sale right now on the internet at $60,000 in your Region of the United States. The IRS uses the higher number submitted on the appraisal and your tax value is $12,000 greater definitely costing you more money.

Real Money:

A Certified Appraiser researches all Approaches to value to establish a reality check on all items they are appraising. It is my suggestion that a very clear discussion of use of the report is a necessity, also I
suggest that every report should have multiple approaches to value considered. Lastly I suggest not using an Auctioneer, Dealer, or internal Bank employee as they may have hidden agendas that may influence the price they state – Also changing your Real Money.

In our next few articles we are going to discuss other approaches to value and also how different values make a huge difference in the Real Values = Real Money Model.

Nathan Bazzle, CMEA, CSBA

certifiedconsultinggroup

Nathan is a Certified Machinery and Equipment Appraiser in the Southern
Indiana Area. To see more information on this topic or to contact Nathan
Directly visit www.CertifiedconsultingGroup.com