Auction Value: Fair Market Value

We’re continuing our discussion of the three different types of value a certified appraiser will provide before a company auctions off its assets. Read the other posts on this topic here.

Fair market value (FMV) is the estimated potential value of equipment and machinery if it were sold in an open market. The following assumptions are made when determining FMV:

• Both the buyer and the seller are willing and knowledgeable about the asset, and neither party is being forced into the transaction.
• The market is open and accessible by many buyers and sellers.
• All rights and benefits attributable to the asset are included in the sale.

Additional factors are considered when assessing FMV: the cost or selling price of the item, sales of comparable assets, replacement costs, and expert opinions. FMV can be somewhat subjective because it is based on the circumstances of place and time, and the availability of sales data for comparable machinery or equipment.

This concludes our series of posts on the three types of asset values that a business should know prior to an auction. Understanding the three types of asset value that should be provided by an appraiser can help a business set appropriate price ranges at auction and receive the highest possible profit from auction sales.

By: Present Value

Tags: auction value, certified machinery and equipment appraisal, fair market value, present value

This entry was posted on Tuesday, November 10th, 2009 at 5:39 pm and is filed under Appraisal Terms, Equipment Auctions, Machinery & Equipment Appraisal. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.