The valuation process begins when the appraiser determines and closes the valuation problem when it will give you the conclusion. The most commonly valuation task is to valuate market value.
Traditionally, valuation methods are specific procedures within three approaches used to describe the value of real estate. In appraising market value, the final goal of the valuation process is a separate valuation that reflects all factors affecting the market value of the property.
In order to complete the valuation process, the appraiser incorporates the use of market research and data analysis and approaches that will ensure the final defense valuation value.
Value your machinery with ValorexoValuation Steps:
STEP#1 Define the problem.
No equipment appraisal “problem” is a simple one. As we face most of the real problems, there are a lot of questions that should be fully answered to valuate the problem of valuation.
- Identify the Client and All Other Intended Users
This is another direct identification when the definitions of “consumers” and “intended members” will be understood. The USPAP defines customers as “parties or parties which valuate the appraiser on the basis of employment or contract.” The USPAP further explains that “the customer can be individual, group or unit and the client can notify and inform the appraisers directly or through the agent.”
- Identify the Intended Use of the Equipment Appraiser’s Opinions & Conclusions
Why customer hiring equipment inspector provide car and equipment valuation? This is the next question we need to answer. We know what is intended for the user, but what about the valuation goals? The Valuation Standards Board defines the use or use of valuation and appraisal valuation, which is determined by the insurer on communicating with the customer during subcontracting.
- Identify the Type and Definition of Value
The value is determined by ASB as “monetary relationship between real estate and those who buy, buy or use these qualities.” The ASB subsequently states that the value should always be qualified by defining a specific value, such as market value, liquidation cost or investment value.
- Identify the Effective Date of the Appraiser’s Opinions and Conclusions
The date of the appraisals key date defines the (temporal) reference frame for which the appraiser arrived at his valuation close.
- Determine Scope of Work
The above points out that the appraiser completed the first phase of the process: to recognize the problem solving. If the problem is known in detail, the appraiser has sufficient information to determine the amount of work required for the performance of the reliable work. The USPAP defines the volume of work at a higher level as “Type and Scope of Research and Analysis”.
Step #2: Collect, Identify, Classify, and Describe
Now it’s time to roll our sleeves, put on our hat and put down. We have already defined the details of which unit we would like to include in the above-mentioned work unit. This finding largely depends on the property valuation. For example, we think that our assignment is a complete job. Our car and equipment inspectors systematically define the factory characteristics of the following three steps:
- Collect facts and data relating to the full life cycle of the plant
We will first find ourselves in the production of products and by-products produced by plants. In our example the final product is concrete.
- Determine how the finished product is produced
Identify the main components of the aggregates factory. In our example we can have a quarry, crushing plant, washing and disinfection system that plays a vital role in the production of the final product. Often, the installation diagram or organization scheme is the most effective way to answer this question.
- Identify the output capacity of the plant
This identification is important, especially if we consider plant valuation according to the results of the valuation method. If the command is not installed, but the vehicle fleet equipment valuation (trucks, construction techniques, trailers, etc.), we use different approaches to determine the characteristics.
Step #3: Consider 3, Apply 1 Equipment Valuation Approach
With the complete equipment list at our fingertips, we need to carefully consider all 3 equipment valuation approaches:
- Sales Comparison approach
- Cost approach
- Income approach.
After careful consideration, the appraiser chooses one approach that he/she feels is necessary to produce the best credible assignment results.
Sales Comparison Equipment Valuation Approach
The sales comparison method is very common in equipment valuation. If you’ve ever heard that your real estate agent was talking about buying or selling a home from “complements”, you’re familiar with the sales comparison method. The logic is that an informed buyer expects to pay a similar price for items sold in the same way. This is true for all markets, be it a bulldozer or a house. However, the bottom line for an equipment expert is that the sale of heavy equipment is not a public document, as is the case for home sales (in most states). This means that comparable equipment sales are not as easy to achieve as the retail price. So, the next time you’re looking for a job with the expert surveyor in machinery and equipment, ask everyone about the comparison method. The method of evaluating comparative purchasing equipment is best used when sales of identical or very similar machines are numerous.
- Cost Equipment Valuation Approach
The cost approach for equipment valuation is a profound subject, but can be more effectively explained by this calculation:
Cost Approach = Current Cost – Depreciation
Current Cost
Specifically, we look at the current cost of the machine as if it were new. Of course, after leaving the factory, a machine is never new and we often judge devices that are not new in this decade. How can we get the current costs for that?! To this end, we first consider the “new replacement cost” approach, then move on to the “new reproduction costs” approach if necessary.
Depreciation
The amortization related to the valuation is different from the accounting term “amortization” and consists of functional and economic obsolescence and physical deterioration.
Cost Approach = (Replacement Cost or Reproduction Cost) – (Physical Deterioration + Functional Obsolescence + Economic Obsolescence)
- Income Equipment Valuation Approach
The income method is another recognized method of evaluating machinery and equipment. This approach attempts to predict the future returns of the valuation equipment. The valuation of income in equipment involves many steps and variables, requires assumptions and requires complex mathematical calculations. Despite the amount of work required for the income approach, the end result remains speculative and is therefore not used as often as previous automatic valuation approaches.
Step #4: Equipment Valuation
Now that we have identified all the elements necessary to obtain credible results, gathered all the features and chosen a valuation approach, it is time to apply our value judgments and conclusions to the equipment or machinery.
To be honest, we have already done most of this step with the previous 3 steps. We can now summarize what we have collected and start linking these parts for inclusion in the review report. This helps the machine and equipment evaluator to organize all the results in an organized way. In this way, a clear overview of the mission is created by identifying complete areas, sections that require attention and things that have been overlooked.
With a rough draft of the valuation report before us, we look at each detail and look for imperfect areas. Once these areas have been identified, the evaluator must go into Sherlock Holmes’ investigation mode.
This may mean that the appraiser talks to the lead expert on a device or meets with an appraiser to inquire about a similar experience, or the results of the auction or …
The depth of this step varies depending on the experience (and / or imagination) of one evaluator to another. Therefore, this can be a good set of questions to ask when evaluating the evaluators.
Step #5: Deliver
Complete the USPAP Standard 8 Valuation Report *. Make all votes necessary. Submit the review report to the intended user identified in step 1.
Although we have systematically addressed the subject of valuation reports, we have found that this is beyond the scope of this article and we will not go back further. But do not worry, we’ll discuss the basics of evaluating equipment ratings in another review, so come back soon!
Although the delivery seems to have been accepted, we felt it was important enough to be able to summarize. Valuation tasks must work together throughout the life cycle of the valuation and the results of the valuation results must not be different. The owner of the equipment and / or the customer must be able to view the valuation before the final delivery. It is not that biased opinions convince values or any other reason, but recognize omissions or misunderstandings and end up taking the necessary voices.
If everyone is certain there are no obvious bugs, complete the examination report of the machine and equipment and submit it to the customer and the intended users.
Simple, no?!
We can now take care of this valuation project, put an end to all our research and continue with the next valuation mission, right?
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