It may surprise you to learn that, outside of real property, anyone can call himself an appraiser. Unlike real estate appraisers, there’s no state licensing for personal property appraisers. So it’s your responsibility to determine if the appraiser is qualified.

Two types of property exist: real property and tangible personal property. Real property includes real estate, land, and buildings. Tangible personal property includes movable items of all types, from commercial machinery and equipment, trucks, buses, and office furniture, to antiques, collectibles, and fine art. We’ll examine appraisers of commercial machinery and equipment.

So what’s it all worth? No easy answer here; the value of an item may differ depending on the function of the appraisal and the “market” used to determine the value: is the purpose of the appraisal for insurance coverage or a claim? Liquidation? Sale or purchase of a business? Equitable division of property (divorce or distribution of an estate)? IRS obligation (probate and estate tax or charitable contribution)? Property tax appeal? Eminent Domain valuation? A knowledgeable appraiser can explain these differences to you.

Prior to any engagement, ask the appraiser if they specialize in the types of items you need appraised.

You wouldn’t visit a podiatrist for a heart problem, so don’t engage a fine arts appraiser to value a Mack truck. Verify any appraiser’s experience and certification in the specific area you need appraised.

Be sure to check the qualifications of the appraiser by asking if they have any formal education in appraisal theory and principles. Do they comply with the Uniform Standards of Professional Appraisal Practice? Do they adhere to a Code of Ethics? Do they continue to take classes and pass exams necessary for recertification? Most appraisal organizations require their members to comply with their Code of Ethics and re-certify every few years. These questions lead naturally to the next: is the appraiser even a member of an appraisal organization? Active participation shows involvement with the profession, peer recognition, and access to updated information. Next, determine the cost of the appraisal. It should be based on either an hourly rate, a flat rate, or a piece rate. Be sure to check if expenses are included when determining the cost. Remember, it’s not ethical for appraisers to charge based upon a percentage of value or on a contingency basis.

The appraisal report itself must be clear and discuss all factors relevant to the value conclusion. All appraisals must be defendable in court. The report should contain all of the following: a cover letter, a statement of limiting conditions, the appraiser’s qualifications, a complete and accurate description of the assets with a defined value for each, the methodology employed, the market analysis, and certification. In addition, a statement that the appraiser has no financial interest (past, present or future) in the property being valued.

Appraisal science isn’t clouded in mystery. If there’s anything you don’t understand, ask the appraiser. The appraiser has an obligation to be forthcoming, so feel free to ask about anything you don’t understand. A good appraiser will always take the time to explain the process to you.

Steve Tatro is president of Valuation Resources,
Inc. He can be reached at 904-733-4114 or by
Email at sctatro@equipment-appraisals.com.