Unless owned by a large corporation, farms tend to utilize the same equipment for many years. After purchasing it used, that is. Repairs are made and parts are replaced, but the machinery depreciates in value nevertheless. When the time comes to sell the farm or at least purchase new implements, the farmer will seek fair market value for his machinery, into which he doubtless poured hard-earned money. While the techniques of appraisers are highly technical and vary from state to state, basic concepts of valuation are fundamentals with which landowners and farmers should be familiar if they are to fetch a decent price for their equipment.
Take an inventory and create an itemized list of each piece of equipment you want evaluated. Pull this item from your files if you keep a list of this sort for tax purposes. Include purchase price, make, model, serial number, year of manufacture and year acquired. Accurate appraisal hinges on more information, not less.
Research the market for comparable implements. Online farmer forums and tractor collector sites frequently post such items for sale, as do print journals and newspapers.
Calculate the replacement cost for you if the item were destroyed or stolen. If the piece is insured, your agent can obtain this figure for you. It is likely lower than the original list price.
Record the physical condition of the equipment. Note any scratches, dents or rust. Observe the machinery when running to confirm it is in good working order. Make an objective assessment of the state of the implement: good, average or poor. A tractor in need of engine replacement is definitely in poor condition, even if it shines on the outside.
Look for alternative uses if the machine in question has been supplanted by newer technology. A cultivator without adaptability to a 3-point hitch, for example, becomes more a candidate for salvage as time passes. Appraisers determine “highest and best use” when making their valuations.
Find out the tool’s original list price and multiply by 85 percent. Take the list price again and multiply by 36 percent. These figures represent purchase price and salvage value respectively. Subtract the salvage value from the purchase price and divide the difference by the age of the machine. This quotient gives a rough estimate of depreciation. Subtract this from the list price.
Add 10 percent to this number if you classified the implement in good condition. Slash 10 percent if its state is poor.
Average the comparable sales prices, the depreciated calculation and the replacement cost for a rough value of the equipment.