Common Scientific & Healthcare Equipment Appraisals - The scientific and healthcare equipment market, by nature, is dependent on high-value, high-technology products, sometimes referred to as "bleeding-edge" technology. End-user appraisals can consist of single products or entire hospitals, imaging or surgery centers or a variety of medical practices. Appraisals can consist of valuing a single or groups of products at fair market value in place and in use for sale/lease-back or for fair market value buyouts. There can also be forecasts of values for determination of residual values in the competitive bidding process prior to the inception of the lease. Not as common is the forensic appraisal, which is usually done years after a lease is terminated to assist the IRS or the SEC with fraud investigations. We find appraisals are needed for a variety of equipment transactions that may occur within or outside an organization. Appraisals are often required in financing new equipment purchases, using existing equipment and inventories as additional collateral or for mergers and acquisitions, personal property tax challenges, divorces, divestitures, retirement or inclusion of a new stockholder/partner.

Concepts of Value - Appraisals often call for more than one valuation concept, with proper planning before starting the assignment the concept(s) that best suit the situation and purpose can be determined. Click here  to view various concepts of value and when they might be applied. 

Fair Market Value - The amount of money paid by a willing buyer to a willing seller, both aware of all relevant facts and neither under compulsion to buy or sell.

Fair Market Value In Place and In Use - Again this value builds on the above value by adding to it such costs as installation, transportation, rigging, selling expenses, commissions, taxes, etc. Because this value reflects the fact that the product is in use, it can be derived from all three approaches to value.

• The cost approach to determination of value begins with looking for the replacement cost of a new asset of the same or similar utility, then deducting all forms of depreciation to the subject asset, including physical (age, condition), technological obsolescence and economic factors external to the asset.

• The income approach capitalizes current net income or projected net cash flows and discounts those at a calculated rate to estimate current value. This approach works when the asset(s) can be identified as a separate business entity and income statements can be obtained or constructed. This is the least frequently applied approach to value in single-asset appraisals.

• The market approach uses market comparables as one would find in a real estate appraisal. In valuing high-technology equipment, this can be a real challenge, as values change rapidly and very little market data exists for equipment sales prices. Additionally, most sales of equipment are private and there are no available reliable market guides. Also, there may be other factors involved with the values seen in comparable sales, such as group discounts, unrealistic trade-ins and other factors not related to the actual value of the equipment.

Forced Liquidation Value - This value is not only reduced by the seller's compulsion to sell, but by the time frame in which the equipment must be sold. The sense of urgency causes the forced liquidation value to be the lowest above scrap value and is often forced by bankruptcy, foreclosure, default and other very negative conditions.

Orderly Liquidation Value - The price paid by a buyer to a seller with the seller under compulsion to sell. The key word here is compulsion. The seller may need to move to a new location, make space for new equipment, or the equipment is no longer needed due to a change in market focus or volume. This usually means the equipment will be sold to a used equipment broker or dealer to be removed from service, transported to a new location and reinstalled. Needless to say, the costs involved in the moving process will greatly affect values. Once again, market values are sought as in the fair market value market approach.

Residual Value - This value is the projected value the lessor expects to receive from a lessee at the termination of a "fair market value" or operating lease. This value should fall somewhere between fair market value and orderly liquidation value and reflects the lessor's calculated expectation of the lessee's willingness to buy the equipment at its fair market value at the end of the lease. If the lessee elects not to buy, the lessor is likely to receive only the orderly liquidation value for the equipment.