Approaches and Methodologies
Every customer has their own unique characteritics and needs. Every Maynards appraisal report is produced to capture and quantify these attributes. Our team is qualified and prepared to deliver a varity of valuation methods and approaches to complete your report.
The following is a list of the various valuation definitions used in our certified appraisal reports. For each appraisal project, Maynards’ appraisers will first meet with the client to ensure both parties understand and agree on the scope of work, including how and on what basis the assets will be valued. Clarity upfront ensures the end product will meet the client’s needs.
Desktop Appraisals
Onsite Inspection Apparisals
Forced Liquidation Value
Orderly Liquidation Value
Fair Market Value
The American Society of Appraisers defines FMV as: “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.”
Fair Market Value – Removed
The American Society of Appraisers defines FMV-R as: “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 removal of the property to another location, as of a specific date.”
All assets are assumed to be sold on a piecemeal basis “as is”, “where is” with purchasers responsible for removal of the assets at their own risk and expense.
Fair Market Value – Installed
The American Society of Appraisers defines FMV-I as: “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.”
It should be clearly understood that the installed appraisal is an evaluation of limited scope, because, by definition, installed appraisals do not consider historical or future earnings potential or apply the Income Approach methodology to provide an indication of value.
Fair Market Value – In Continued Ude
The American Society of Appraisers defines FMV-ICUAE) as: “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.”
Replacement Cost New
The American Society of Appraisers defines Replacement Cost New as: “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
The American Society of Appraisers defines Reproduction Cost New as: “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
The American Society of Appraisers defines Salvage Value as: “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
The American Society of Appraisers defines Scrap Value as: “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.”
Approaches to Value
There are three generally recognized approaches to the determination of value: Market, Cost, and Income. These approaches are widely accepted by financial institutions, courts, government agencies, and businesses. These approaches are defined as:
Market Approach One of the three recognized approaches used in appraisal analysis, this approach involves the collection of market data pertaining to the subject assets being appraised. This approach is also known as the ‘Comparison Sales Approach’. The primary intent of the market approach is to determine the desirability of the assets and recent sales or offerings of similar assets currently on the market in order to arrive at an indication of the most probable selling price of the assets being appraised. If the comparable sales are not exactly similar to the asset being appraised, adjustments must be made to bring them as closely in line as possible with the subject property.
Cost Approach One of the three recognized approaches used in the appraisal analysis, this approach is based on the proposition that the informed purchaser would pay no more for a property than the cost of producing a substitute property with the same utility as the subject property. It considers that the maximum value of a property to a knowledgeable buyer would be the amount currently required to construct or purchase a new asset of equal utility. When subject asset is not new, the current cost must be adjusted for all forms of depreciation as of the effective date of the appraisal.
Income Approach One of the three recognized approaches used in appraisal analysis, this approach considers value in relation to the present worth of future benefits derived from ownership and is usually measured through the capitalization of a specific level of income. This approach is the least common approach used in the valuation of machinery and equipment since it is difficult to isolate income attributable to such assets and was not utilized for this appraisal project.
Depreciation Defined as the actual loss in value or worth of a property from all causes including those resulting from physical deterioration, functional obsolescence, and economic obsolescence.
Physical Deterioration A form of depreciation where the loss in value or usefulness of an asset is attributable solely to physical causes such as wear and tear and exposure to the elements.
Functional Obsolescence A form of depreciation where the loss in value is due to factors inherent in the property itself and due to changes in design, or process resulting in inadequacy, over capacity, excess construction, lack of functional utility, or excess operating costs.
Economic Obsolescence A form of depreciation or loss in value, caused by unfavorable external conditions. These can include such things as the economics of the industry, availability of financing, loss of material and labor sources, passage of new legislation, and changes in ordinances.
We also conduct other valuations and we would value the opportunity to discuss your specific needs.