Appraisal - an unbiased and independent opinion of value.
Concepts of Value - appraisal assignments often require more than one value. The appraiser, before beginning the process will investigate the assignment thoroughly in order to arrive at the concept that best suits the situation and purpose of the appraisal assignment. Some of the most common values are as follows.
Cost Approach - Calculation of value beginning with a determination of the replacement cost of a new asset of the same or similar utility, followed by deductions for all forms of depreciation to the subject asset including; physical (age, condition), technological obsolescence and economic obsolescence.
Desk Top Appraisal - A professional opinion of the appropriately defined value, expressed in terms of currency to be realized by the sale of assets, in which the opinion is generated from lists and/or other informational materials supplied to the appraiser and evaluated without the benefit of an actual on site inspection.
Fair Market Value - the estimated amount, expressed in terms of money, which may reasonably be expected for a property in an exchange between willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.
Fair Market Value In Place (FMVIP) - Defined as the estimated highest gross value, which a willing buyer would be justified in paying and a willing seller would be warranted in asking if each, is: Well-informed or well advised and acting prudently, in his own best interest; motivated by typical desire to buy and sell with neither party under duress; allowed a sufficient amount of time to test the marketplace and both parties being capable, and authorized to complete the transaction. This concept may be considered as a bulk asset sale to a hypothetical buyer who would continue to use the subject property in place for continued (same or similar) operations on a turnkey basis. The stated estimate is an opinion estimated by today's replacement costs including accessories, installation, leasehold-improvements, etc. as well as any pertinent economic factors regarding these assets but not regarding the value of the business itself. Value stated assumes equipment is being sold with "free and clear" title.
Forced Liquidation Value (FLV) - is the estimated gross amount expressed in terms of money that could be typically realized from a properly advertised and conducted on-site public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.
Income Approach - capitalization of current net income or projected net cash flow and discounts those at a calculated rate to estimate current value. This is the least employed approach to value in single asset appraisals of equipment.
Sales Comparison or Market Approach - involves the collection of market sales data pertaining to the subject assets being appraised in order to determine the desirability of the assets through recent sales or offerings of similar assets currently on the market in order to derive the most probable selling price for the assets being appraised. In high tech technology, values change rapidly and little market data may exist for certain assets.
Glossary
A division of Jones Swenson Auction Marketing, Inc. Providing appraisal services at affordable prices. Locally owned and operated since 1983.
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