At Wiley Financial we offer asset appraisal services in San Diego. We are based in Carlsbad, CA but we service clients all around Southern California.
Asset appraisal is the process of estimating an asset’s value, based on factors such as its cost, the income it generates, and its fair market value (FMW) compared to that of similar assets.
Two of the main areas of focus for our asset appraisal services are machinery and equipment appraisals and inventory appraisals.
Machinery & equipment appraisals are typically for the purpose of asset based lending or refinance; allocation of purchase price (Fair Value); bankruptcy; condemnation or eminent domain; corporate conversions and dissolution; divorce; insurance loss settlement; lease end negotiations; management considerations; mergers, purchases, and sales; and taxation (ad valorem, estate and gift).
Inventory appraisals are typically provided for the purpose of asset based lending or refinance. Inventory appraisals that are accomplished for secured lenders or are related to a loan transaction are typically prepared on the basis of Forced Liquidation Value or Orderly Liquidation Value.
The Asset Appraisal Process
The following asset appraisal process is an orderly procedure for arriving at an estimate of value. This procedure is also preparation for a Summary Appraisal Report. By following this procedure, Wiley Financial, Inc. appraisers begin with a preliminary study of the items to be appraised. From there, we define the basis from which the appraisal is to be made. A program is then initiated for the accumulation, analysis, and observation of data. The data called for in the preliminary study is then gathered, classified and analyzed.
In assignments to estimate Fair Market Value, the ultimate goal of the valuation process is a supported conclusion that reflects the appraiser’s study of all influences on the value of the assets being appraised. Therefore, the appraiser studies the assets from various applicable viewpoints.
Various approaches are interrelated, and each involves the gathering and analysis of sales, activity, and value data in relation to the assets being appraised. From the analysis the appraiser derives separate indications of value for the assets being appraised. One or more approaches may be used, depending on their applicability to the particular appraisal assignment.
To complete the valuation process, the appraiser integrates the information drawn from the market research and analysis of data and from the application of appraisal techniques to form a conclusion. This conclusion may be an estimate of value or a range in which the value may fall. An effective integration depends on an appraiser’s skill, experience, and judgment.
An Appraisal Report is then prepared including various exhibits which point out the facts and reasoning leading to the final estimate of value.
While we primarily provide our asset appraisal services in San Diego, we are also happy to assist clients all over Southern California. That being said, if you have questions on asset appraisal services, that have not yet been answered please continue reading below or contact Wiley Financial directly and we will guide you through the process.
Degree to Which the Assets are Inspected or Identified
An onsite visit will be conducted to view the equipment. A visual inspection will be made to verify that the equipment exists and is working. The equipment will be observed and will be assumed to be in good working order, though a detailed mechanical inspection will not be made.
Extent of Research Into Physical or Economic Factors That Could Affect Asset Appraisal
The appraiser will have conversations with manufacturers and suppliers of the subject items. The appraiser will not have had access to the profit and loss statements or tax returns of the Subject Company. It is assumed the machinery/ equipment, which will be the subject of the report, will remain in place and in use well into the future.
The purpose of the report is not to comment on profit or loss of the subject business, and if there is concern in those areas, the reader or user of this report should conduct further studies.
Extent of Data Research
The appraiser, in conversations with all listed sources, described to the best of his ability the characteristics of the subject equipment. It is understood equipment items may be purchased/sold with a variety of peripheral attachments, support items, and other amenities which could affect value. It is not always possible to know of such factors that may or may not exist. Therefore, it is assumed the subject equipment does in fact have basic qualities needed for operation and would have an expected amount of peripheral amenities associated with the subject item.
All information provided to the appraiser is believed to be accurate but not warranted or guaranteed.
Highest and Best Use
The highest and best use of this equipment would be for the equipment to be utilized as part of a going concern business operation. Obviously, all machinery and equipment items are best utilized with their income producing capabilities functioning.
Confidentiality and Privacy
The appraiser will maintain the conformity and privacy of customer information obtained in the course of this assignment in compliance with USPAP and Regulation Practices, Title V of Gramm, Leach, Bliley Financial Modernization Act. Due to the emphasis we put on protecting the security and confidential information about the client, we do not sell information about our client to others. We only share information outside our company when necessary to administer products or services we provide when we have your permission, or when required or permitted by law.
Methods of Valuation
Appraisal methods employed in arriving at the final conclusion as to value on all of the equipment include the Cost Approach Analysis and the Market Data Approach Analysis. At times, the Income Approach Analysis is used.
Cost Approach Analysis to Asset Appraisal
The Cost Approach Analysis is defined as a “method in which the value of an asset is derived by estimating the replacement cost of the improvements and deducting them from the estimated depreciation.”
In determining depreciation, the appraiser has used his judgment and prudence in determining the depreciation factor. Experience with this type of equipment has proven the use of a formula, which is as follows:
Fair Market Value = (Remaining Life/Normal Life) x Cost New
The Market Data Approach to Asset Appraisal
This approach is an appraisal technique in which the market value estimate is predicated upon prices being paid in actual market transactions and current listings, the former fixing the lower limit of value in a static or advancing market and fixing the higher limit of value in a declining market; and the latter fixing the higher limit in any market. It is a process of correlation and analysis of similar recently sold assets.
The reliability of this technique is dependent upon:
- The degree of comparability of assets with the asset under appraisal;
- The time of the sale;
- The verification of the sale data;
- The absence of unusual conditions affecting the sale
In an effort to provide Cost Less Depreciation Analysis, the appraiser will use, when possible, the actual manufacturer (or dealers) of the subject equipment. At times, new replacement models are offered when the subject model is no longer being made. When this condition exists, the appraiser endeavors to correlate and adjust for various factors involved.
If the actual manufacturer of the equipment is not available or cannot be reached for any reason, then dealers or distributors are contacted when possible for verification of similar items with similar utility. Sometimes the manufacturer, distributors and dealers can provide information for the Market Data Approach as well, since they are oftentimes aware of equipment on the used market, even selling similar equipment at times.
The Income Approach to Asset Appraisal
The Income Approach to value is used only when solid data involving income and expenses for a particular item can be established. It is considered hypothetical in most situations involving machinery and equipment, and though while considered, has not been applied in the final value estimate.
- Fair Market Value – The estimate of the market value of an asset based on what a knowledgeable, willing and unpressured buyer would most likely pay to a knowledgeable, willing and unpressured seller in an open market.
- Orderly Liquidation Value – An orderly sales process in which the seller can take a reasonable amount of time to sell each asset through channels of sale and distribution that bring the highest reasonable price.
- Forced Liquidation Value – The value that an asset would sell for in an advertised and conducted public auction.
Other Types of Asset Appraisal Services
- Certified Appraisal
- Desktop Appraisal
- Professional Estimate of Value
If you need the help of asset appraisers in San Diego or have questions around asset appraisal services in San Diego, Wiley Financial would be happy to help! Please reach us by email at [email protected], by phone at 760-994-8874 or contact us here.