Why a Certified Appraisal Matters
There are a number of certifying and regulating entities governing machinery and equipment appraisers, in the U.S. and internationally. We will focus mostly on the U.S. market, but here we define and describe all of these organizations. When conducting or commissioning an appraisal, you want the appraisal to be credible, acceptable to investors and counterparties, even to hold up in court when necessary. This is why it is critically important when sponsoring an appraisal to ensure that the appraiser holds the correct credentials. This article will describe the various certifying appraiser organizations and their corresponding strengths and weaknesses and appropriateness for various appraisal projects.
Survey of Appraiser Membership and Chartering Bodies
American Society of Appraisers (“ASA”). ASA is the oldest professional appraiser membership organization in the US, with current membership of 5,000 appraisers. ASA in recent years has expanded to Europe and other regions of the world, but it is traditionally a US organization. ASA provides professional development, designations (commonly known as “certifications”), conferences, and other events. The primary designation granted by ASA is “Accredited Senior Appraiser”, or “ASA”. An appraiser earns the ASA’s ASA designation by completing several years of appraisal experience and by completing a series of weeklong training courses covering appraisal practice, strategy, techniques, and philosophy. Beginning ASA members are known as “Candidates” until they complete the courses and exams and experience.
Association of Machinery and Equipment Appraisers (“AMEA”). AMEA was founded in 1983 by the members of the Machinery Dealers National Association, so by a group of machinery and equipment brokers and resellers. AMEA members agree to a code of ethics and agree to conform with industry standard Uniform Standards of Professional Appraisal Practice, among other standards. The two levels of AMEA membership are Associate Member, and Certified Equipment Appraiser, which requires passing USPAP education and exam and completing 5 years or more appraisal experience.
Royal Institute of Chartered Surveyors (“RICS”). RICS claims roots going back to 1792, with the Surveyors Club. But the foundations of the current RICS organization were laid in 1868 in London by 49 surveyors who formed the Institution of Surveyors. RICS has been the primary European association of machinery and equipment appraisers, but, like the ASA, has expanded worldwide. RICS has 134,000 appraisal professionals and trainees in offices worldwide. RICS enforces Rules of Conduct for the practice of equipment valuation, and standards for ethics. Certified RICS appraisers who have completed the RICS course of study and certification are designated as “Chartered Surveyor”, which is a designation encoded in business laws and regulations in many countries.
Equipment Appraisers Association of North America (“EAANA”). The EAANA is a smaller professional appraiser association, founded in Pennsylvania in 1990 by 15 construction and mining industry appraisers. The association expanded membership to all disciplines of machinery and equipment appraisal in 1995, and currently has “over 120 members”. In 1997 EAANA adopted as a standard of its practice the industry standard Uniform Standards of Professional Appraisal Practice, like the other leading appraiser membership associations.
How to Conduct and Appraisal That Will be Acceptable to Investors and Banks
In the U.S., the gold standard for certified appraisals is ASA certification by an Accredited Senior Appraiser of the American Society of Appraisers. Having said that, there are thousands of different equipment types, from swamp buggies to CNC machine tools to medical imaging MRI scanners, so the most important feature of a high-quality appraisal is to get a qualified individual to conduct the appraisal, whatever his membership or affiliation. ASA certification is the usual way to accomplish this, as this organization strictly governs who is designated as an Accredited Senior Appraiser by virtue of experience and education. ASA appraisers agree to conform with a code of ethics, and to conduct all appraisals in compliance with the Uniform Standards of Professional Appraisal Practice.
When selling an investment – “paper” – to a bank or private equity or other financial institution, that counterparty will need to be sold on the value of the equipment, the value of the collateral underlying the investment, usually by asserting an appraisal conducted by an appraiser who is certified by ASA. You need the investor buying the paper to “buy into” the level of collateral coverage needed to make the transaction work. This is often accomplished in part by the bank, the seller of the paper, representing that the appraisal was conducted by a well-known and competent appraisal company such as Blue Chip Asset Management, a brand name designation that the relevant financial institution will already know and trust, in part as ASA members. However, the important designation is ASA; the transaction cannot always afford or support the very high fees charged by some large appraisal companies; also, the big appraisal company might assign a junior analyst to work on your project.
RICS is the certifying body that is important for European transactions. RICS can be sold in the US – a valid collateral value assessed by a Chartered Surveyor – but is primary European in history and prestige and noteworthiness.
AMEA and EAANA organization membership are less well-known, but many banks and financial institutions will accept these designations / certifications as valid representations of collateral value in machinery and equipment appraisals. Just not as well known as ASA and RICS. And, depending on the exact equipment under valuation, you may find the expert you know and trust the best out of one of these groups.
Chris Nugent is an Accredited Senior Appraiser of the American Society of Appraisers. He holds a BA in Statistics from the University of California, Berkeley, and an MBA from Santa Clara University.
BlueChip Asset Management is an appraisal and asset management services company which serves the ABL, banking, equipment finance, legal, and turnaround industries. Members of TMA, ELFA, and CFA. Contact us for asset valuation assistance at 415-515-1110, www.bcamasset.com, or schedule a free 15-minute consultation.