The Appraisal Nobody at the Company Knows About
Why the first equipment number in a sale is often taken after hours, and what the buyer's lender does with it
Some of my site visits happen after the last shift leaves, or on a Saturday. The owner meets me at the door. Nobody on the floor knows the business is for sale, and nobody on the floor will learn it from me.
That's a pre-market equipment appraisal. The seller orders it before the business is listed, often before anyone outside the owner's office and the broker's knows a sale is coming. It is the same full USPAP appraisal a lender would order. What changes is who holds the number, and when.
How the walk works
I don't wear a company shirt on any appraisal, and I rarely give a company name. On a sale the staff hasn't been told about, that habit means the walk looks like any other day I'm on site. The owner decides what his people are told, and I follow his lead. I've been introduced as there for an equipment review, or a count. Both are true. I won't lie about why I'm there, and when I'm asked not to say, I don't say.
The hardest part of the day is usually the front desk. A good gatekeeper wants to know what company I'm with before I get past, and that's her job. I give my name and say the owner is expecting me.
Brokers put real effort into keeping a sale quiet until it closes, and the appraisal doesn't have to be what gives it away. That gets settled when the walk is scheduled, well before the morning of it: who knows, who doesn't, what the staff has been told, and whether the walk happens during the shift or after it.
Why order it before the listing
Most owners already know roughly what their equipment is worth. About four out of five I work with are close, because they buy and sell that equipment day to day. For them, the appraisal confirms the number and puts it in a form a lender or a buyer can rely on.
The other one in five is where a deal gets surprised, and it runs both directions about equally. Some are sitting on more than they think: a machine bought cheap years ago, or bought used before prices ran up, carried at zero on the depreciation schedule. Others are carrying a number the market won't pay, sometimes because a retirement plan has been leaning on it.
Found before the listing, either surprise is a pricing decision the seller makes with time on his side. There is room to clean up the asset list, sell what the operation no longer uses, and update the appraisal right before going to market. Found after the offer, the same gap gets argued out of the price or the loan on a deadline.
I have been brought into a sale three years ahead of it. I have also been called at the last minute before closing, because the buyer's lender wanted an appraisal. The report is the same kind of report either way. What the seller can do with it is not.
The question every broker asks next
If the seller pays for the appraisal, does the buyer's lender have to accept it?
It doesn't have to. Sometimes it does anyway. I've seen both.
On an SBA loan, the rule behind this sits in SOP 50 10 8.1, Appendix 19: "If the valuation of fixed assets exceeds Net Book Value, the Lender must obtain an independent appraisal by a qualified individual to support the higher valuation." Without one, used equipment counts at no more than 50% of net book value. With an orderly liquidation appraisal, it can count at up to 80% of that value.
The SOP says the lender must obtain the appraisal. It doesn't say who has to order it, and lenders read that differently. Some will rely on a report the seller ordered. Others order their own every time.
What USPAP doesn't allow is changing the name on the cover. A report is written for a client and the intended users named in it. A lender that wasn't named and wants to rely on the report needs a new assignment from the appraiser. A readdressed copy doesn't qualify.
Why it's worth doing even when the lender orders its own
Say the buyer's lender orders a second appraisal. The seller's report has already done its work.
The seller priced the business on a documented number instead of a remembered one. The broker went to market with an equipment figure that had market evidence behind it. And when the lender's appraisal comes in, it lands next to a full USPAP report from an appraiser who walked the same equipment. If the two are far apart, the seller has something to set beside the lender's number besides his own opinion.
Without that first report, the only documented equipment number in the deal is the one the buyer's side ordered.
The first number on paper in a deal tends to be the one everyone negotiates from. In a sale with real equipment in it, the seller can decide whose number that is, and it can be done on a Saturday without anyone on the floor knowing.
For the brokers reading this: on your last equipment-heavy listing, who put the first equipment number on paper?
About the author
Nathan Bazzle, MCMEA, CSBA, holds the Master Certified Machinery and Equipment Appraiser designation — one of 26 in the U.S. — with 20+ years and more than 900 engagements across mining, oil and gas, aggregate, heavy construction, and manufacturing. His appraisal and expert witness work runs through BAZZLE, serving lenders, attorneys, trustees, and industrial operators nationwide.
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