FAQs & Definitions

Fair Market Value — Installed is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering market conditions for the asset being valued, independent of earnings generated by the business in which the property is or will be installed, as of a specific date.

Fair Market Value — Removed is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering the cost of removal of the property to another location, as of a specific date.

Fair Market Value in Continued Use with Assumed Earnings is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and assuming that the business earnings support the value reported, without verification.

Fair Market Value in Continued Use with an Earnings Analysis is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and supported by the earnings of the business.

Fair Market Value is an opinion expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date.

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.

Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither has to buy or sell. If parties with adverse interests place a value on property in an arm’s-length transaction, that is strong evidence of FMV. If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary.

Forced Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted 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.

Liquidation Value in Place is an opinion of the gross amount, expressed in terms of money that typically could be realized from a properly advertised transaction, with the seller being compelled to sell, as of a specific date, for a failed, non-operating facility, assuming that the entire facility is sold intact.

Orderly Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.

Replacement Cost New is the current cost of a similar new property having the nearest equivalent utility as the property being appraised, as of a specific date.

Reproduction Cost New is the cost of reproducing a new replica of a property on the basis of current prices with the same or closely similar materials, as of a specific date.

Salvage Value is an opinion of the amount, expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date.

Scrap Value is an opinion of the amount, expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.

An appraisal is the independent and unbiased process of determining the supportable opinion of value of tangible assets as of a specific date. Appraisals can be performed for a variety of value premises from fair market value in place and in use, to forced liquidation value (see Reasons for Appraisals).

The unique nature and portability of machinery and equipment create a need for many different valuation terms that don’t exist in other appraisal fields such as real estate or gems and jewels. Many of the items we appraise are unique plant processing installations that have no comparable sales.

Machinery and equipment appraisals also vary due to intended use of the valuation. For example, the valuation method used for forced liquidation in an insolvency scenario results in a very different value than valuation for replacement cost needed for an insurance loss claim. This also illustrates why it is critical that an equipment appraiser fully understand the intended use of your equipment appraisal. You can read more about this in our blog post 6 Factors of Equipment Appraisals.

We provide FREE consultation of your equipment appraisal needs. By thoroughly reviewing your specific situation, we can accurately determine what type of equipment appraisal you need and what you don’t need. You will save money by getting the exact equipment appraisal your situation needs. Call 530-795-5536 or email us to get a free consultation.

It is important to use an equipment appraiser who is a member of the American Society of Appraisers or another organization represented on the Appraisal Foundation Board. Be sure that your appraiser has taken a USPAP course within the last 2 years since USPAP changes frequently. Take a look at this competent equipment appraiser for more suggestions on choosing a competent equipment appraiser.

The job of an equipment appraiser is to arrive at an unbiased opinion of value. While value is often determined by looking at some form of price data and making adjustments, it is not accurate to assume that the selling price of an item will be the same as the value. Have you ever gotten a deal on a piece of equipment and felt that you paid less than value? Have you ever realized after a transaction that you could have gotten the same item cheaper some place else? An equipment appraisal will provide an opinion of value that in all likelihood will not match your purchase receipts.  We’ve also addressed this question in a number of blog posts, such as Value v Price and What’s Your Equipment Worth?

USPAP (Uniform Standards of Professional Appraisal Practice) is published and maintained by the Appraisal Standards Board (ASB) of the Appraisal Foundation, a non-governmental entity charged by Congress to set all appraisal standards. USPAP identifies a minimum set of standards that apply in all appraisal, appraisal reviews, and appraisal consulting assignments. USPAP has been specified by the IRS as a crucial qualification for many types of appraisal reports, including all equipment appraisals for tax-related reasons.