What does an appraiser look at when valuing used equipment for a business sale?

BDC says equipment value depends on the purpose of the valuation and the appraisal method used, and that arriving at an appropriate value can be complex. It says appraisers can use a combination of three main methods once the type of value is chosen. This page describes those methods and the factors BDC names. It gives no values and no price guidance.

Sales comparison

BDC says that in the sales comparison method an appraiser researches the market for similar new and used equipment and what it has sold for, and may make adjustments for the equipment’s age, condition, remaining useful life and other factors. It says appraisers typically look at a variety of market data sources, such as manufacturers, dealers, auction houses and trade publications.

Cost and income

BDC says the cost method is typically more important if equipment has no active market because it is unique or highly customized. It starts with replacement cost new, the current cost of buying a new asset that does the same thing, then depreciates that based on the equipment’s age, condition and other factors. CBV Institute’s glossary describes the cost approach as reflecting the principle that a buyer will generally pay no more for an asset than the cost to obtain another of equal utility. BDC says the income method looks at how much income the equipment produces and may be relied on more when the asset is clearly tied to a specific income stream.

Who appraises, and what to ask

CUSPAP has a Machinery and Equipment Appraisal Standard for formal opinions of value on machinery and equipment. Ask the appraiser which documents they need. See original cost or current worth.