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Machinery & Equipment Appraisal Value Definitions
Clear definitions of the most common machinery and equipment appraisal values, including Fair Market Value, Orderly Liquidation Value, Forced Liquidation Value, and Fair Market Value in Continued Use.
The selected value premise is critical because different intended uses require different valuation conclusions.
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Why Value Definitions Matter
Machinery and equipment values are not one-size-fits-all. The same asset may have a different value depending on whether it is being appraised for financing, litigation, estate planning, business sale, insurance, financial reporting, or liquidation.
A credible appraisal identifies the correct premise of value, the intended use, the intended users, and the conditions under which the equipment is assumed to be sold or retained.
Fair Market Value
Fair Market Value generally represents the estimated price for which equipment would exchange between a willing buyer and willing seller, both having reasonable knowledge of the relevant facts and neither being under compulsion to buy or sell.
Fair Market Value in Continued Use
Fair Market Value in Continued Use assumes the equipment remains installed, operational, and part of an ongoing business enterprise. This premise may be appropriate when equipment has utility as part of a functioning operation.
Orderly Liquidation Value
Orderly Liquidation Value reflects an estimated sale price under liquidation conditions, allowing a reasonable period of exposure to locate buyers and conduct an orderly sale process.
Forced Liquidation Value
Forced Liquidation Value reflects a more compressed sale scenario where assets may be sold quickly, often under distressed conditions, with limited exposure to the market.
How the Value Premise Affects the Conclusion
The premise of value can materially affect the appraisal conclusion. Equipment valued as installed and operating in a business may produce a different conclusion than equipment valued for removal, auction, or forced sale.
In Continued Use
Assumes the asset remains installed, productive, and part of an operating business.
Removed for Sale
Considers the market for equipment sold separately from the business or facility.
Orderly Sale
Allows time to identify buyers and market the equipment in an organized manner.
Forced Sale
Assumes limited time, reduced market exposure, and distressed sale conditions.
Common Uses for Different Value Premises
Bank & SBA Financing
Often requires Fair Market Value, Orderly Liquidation Value, or both, depending on lender requirements.
Business Sale or Acquisition
May involve Fair Market Value in Continued Use when equipment remains installed and operating.
Litigation, Divorce & Estates
Usually requires clearly defined value premises tied to the legal purpose of the appraisal.
Liquidation & Special Assets
May require Orderly Liquidation Value or Forced Liquidation Value for workout, recovery, or sale planning.
Factors Considered in Equipment Valuation
• Age and condition
• Make, model, and specifications
• Installation and removal considerations
• Remaining useful life
• Market demand
• Comparable sales and listings
• Replacement cost and depreciation
• Functional and economic obsolescence
• Industry conditions
• Intended use of the appraisal
Need Help Determining the Right Value Premise?
Send us your equipment list, photos, asset records, or lender requirements. We will help identify the appropriate appraisal scope and value premise for your assignment.
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