Medical Equipment Appraisal | 5 Tips to Determine Market Value

Are you looking for a medical equipment appraisal?

If you’re trying to determine the Fair Market Value of equipment in California, this guide contains five tips to help you make the process go smoothly and consistently.  It also depends on the amount of equipment that is part of the report.

1.  Understand The Common Methods of Medical Equipment Appraisal

There are three main methods of medical equipment appraisal: a sales comparison, cost, and income.  Each one has advantages and disadvantages.  The cost approach is one of the more popular methods of appraisal.  The approach is simple: What would replacing each piece of equipment cost?  From there, the appraiser looks at the age of the equipment, the mechanical issues, and the obsolescence factors.

The income approach is a little different.  Instead of looking at cost, the appraiser has to use available data to calculate the current income value of the machinery.  As you might imagine, solid concrete data on the asset’s income-producing ability is essential.

The final method is called a sales comparison.  With this method, the appraiser researches recent sales of the specific medical equipment.  This research then guides the determination of the value.  Each comparison requires extreme specificity to help guide the Fair Market Value.

2.  Learn the Differences Between Appraisal Form Types

There are two types of machinery and equipment appraisal reports: a desktop version and a summary report.  The desktop report is in-depth, but the data collection process is different.  Indeed, the appraiser does not directly look at the equipment in question.  There is no physical visit; instead, the appraiser will look at the information provided by the owner and conduct their research.

When an Expert Equipment Certified Appraiser (EECA) conducts a desktop report, it still complies with all federal and state regulations as the Unifrom Standards of Professional Appraisal Practice (USPAP) requires.  The lack of physical inspection does not change the validity of the summary report.

The summary report includes a physical inspection of the medical equipment and independent research by the appraiser. It also includes the valuation of every piece of equipment listed separately and a total valuation of all equipment grouped together.

3.  Understand What Impacts a Medical Equipment Appraisal

A medical equipment appraisal is more than arbitrarily choosing a valuation that sounds good on paper.  Multiple factors impact the appraisal.

One of the most critical factors that impact a medical equipment appraisal is the timing within the market.  Even the most highly sought-after equipment can sit for a while if the market is experiencing a period where money isn’t circulating at a high level.  A deep recession curbs purchases, as uncertainty leads buyers to wait until there are better market conditions.

An often-overlooked factor in the machinery and medical equipment appraisal process is the chain of ownership, otherwise known as the title.  A clear title represents the ultimate buyer confidence; they have proof that the piece of equipment exists and that you are also the proper owner.

If the property in question is encumbered by a lien or other title issues, buying the equipment is more difficult.

4.  Follow the Process with a Certified Equipment Appraiser

When you speak with an appraiser, their work includes multiple steps.  For example, the formal equipment appraisal includes an engagement agreement.  This is where not only is the agreement to partner together on an assessment established, but the appraiser also builds their written appraisal based on the scope of work agreed upon.

Think of the process like this: an agreement is between you and the appraiser.  The appraiser brings their expertise to the table for you, but in turn, you are specific about what type of appraisal you’re looking for.  Most business owners are looking for fair market valuations of specified medical equipment.

The agreement has to outline everything, including the medical equipment that needs appraisal.  It includes a full listing of the equipment, the type of appraisal, the intended use of the appraisal, and the scope of work.  An Expert Equipment Certified Appraiser (EECA) is useful not just when you want to sell equipment but also in the event of a divorce.  Clear valuations backed by solid evidence are necessary for the judge to determine how assets should be distributed.

5.  Remember The Importance of Medical Equipment Appraisal Services

It is important to remember that buying and selling equipment are serious events that carry serious tax consequences.  In the event of an audit, documentation, and expertise can make the difference between a severe tax penalty and the audit simply becoming an inconvenience.  An Expert Equipment Certified Appraiser (EECA) has the qualification the IRS recognizes and is also acceptable in a court of law.

Discrepancies in equipment sales often result from people with minimal experience appraising equipment.  Even if they professionally appraise other items, that expertise doesn’t truly transfer to machinery.

Not going with a qualified professional opens up significant liability and risk to companies of all sizes.  EECAs can present the right documents in court and have those documents accepted as evidence.  Having the right professional in court is extremely important if you must defend your deductions or uphold your own records.

Having a proper appraisal also clears things up between you and the insurance companies in the event of a loss.  Knowing the fair market value and replacement costs of the medical equipment in question gives you a solid footing if the insurance company undervalues the assets.

In the case of medical equipment directly linked to income, filing a loss of use claim is much easier when you have appropriately documented an estimated income expectation from that equipment.

As you can see, learning how to value equipment is not enough, though it’s a great start.  Certified machinery and equipment appraisers hold the key to not just a valuation but a document that can stand up against scrutiny.  Having a qualified third party declare the value of equipment and machinery is much better for buyers than simply accepting whatever price you’re placing on the equipment.

Tip: selling a business starts with a business valuation

With a Certified Machinery and Equipment Appraiser at your side, we feel confident that you will have an equipment appraisal at the highest price.

Go to the next article: Part of tips to conduct machinery and equipment appraisal in California series ->

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