Appraisal Terms

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Appraisal Terms

Unique circumstances may dictate specific definitions not found below. Many terms are used to describe notions of value. The definitions offered here are to provide the fundamental concepts and are not the only acceptable definitions, since contracts may dictate a somewhat different notion. Therefore, these definitions may be expanded or redefined as the purpose and function of the appraisal may dictate as long as the fundamental concept is not altered.

Replacement Cost – New

The current new cost of replacement of identical property, or property of like kind, capable of producing equivalent benefits (results) for the owner. Determination is made from manufacturer’s sales of same or similar property and from the owner’s invoices. The values also reflect the cost of freight, and installation, but do not include any applicable taxes.

Replacement Cost – Market

The current cost of replacement of identical property, or property of like kind, capable of producing equivalent benefits (results) for the owner. For equipment packages such as rigs, replacement can be based on a combination of used equipment in equivalent condition (where available) and new equipment. The values also reflect the cost of freight, and installation, but do not include any applicable taxes.

Fair Market Value

The estimated amount expressed in terms of money, that may be reasonably be expected for property in exchange between a willing buyer and a willing seller, with equity to both, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts… in the most common market. This value assumes the equipment has been maintained according to the manufacturer’s recommendations and performance standards. Determination is based on the comparable method that is comparing past sales of same or similar property. Further consideration is based on the appraiser’s specific knowledge of the subject property and reflects the condition found based on the physical inspection performed and the information provided.

Fair Market Value in Continued Use

The estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of the relevant facts, including installation, as of a specific date and assuming that “the business earnings support the value reported”.

Liquidation Value in Place

The estimated gross amount, expressed in terms of money, which is projected to be obtainable from a failed facility assuming the entire facility would be sold intact within a limited time to complete the sale.

Orderly Liquidation Value

The estimated gross amount, expressed in terms of money which could be typically realized from a sale, given a reasonable period of time to find a purchaser(s), with the seller being compelled to sell on an as is-where-is basis.

Forced Liquidation Value

Normally associated with auctions, is the estimated gross amount, expressed in terms of money which could be typically realized from a properly advertised and conducted public sale, with the seller being compelled to sell with a sense of urgency on an as-is where-is basis.