Common Misconceptions About What Auction Value Really Means

Although it may sound strange, there really isn’t a formal definition of auction value. It means: “The price that a particular property brings in open competitive bidding at a particular public auction.” The value for assets being sold at an auction will vary greatly depending on several key factors, such as the assets being sold, location of the auction, how the auction was marketed and for what length of time, the size and type of the auction, and how many attendees were present.

Oftentimes, as we have discussed in numerous post about auctions, when most people talk about auction value, they are talking about pricing for a public auction sale or “forced liquidation value.” This is where misconceptions about auction value can occur. It often assumes an unwilling seller acting under duress; in addition, it implies a diminished sales value because of buyers taking advantage of the unwilling seller.

By using forced liquidation value to mean auction value, it also presupposes inflationary or depreciable conditions that affect sales, such as physical location, difficulty of removal, adaptability or specialization, marketability, physical condition, overall appearance, and total psychological appeal. It also means that the seller must find interested buyers during a marketing period of 90 days or less. Also inherent in this definition is the understanding that all equipment or assets listed be sold on a piecemeal, “as is/where is” basis, with the buyers being responsible for removal at their own risk and expense.

By using this definition for auction value, there is no consideration for additional values that might be obtained due to product line, equipment in place, ongoing operation, or other elements of value that could or might be produced at an auction sale.

Not all auction sales occur under forced sale conditions, and auctions sometimes produce a wide array of price points equal to many value definitions, so it makes sense to always make sure you use a certified equipment appraisal to understand all the definitions of value in an auction setting. Present Value can represent companies throughout the whole auction process.

By: Present Value

Additional Reading:

Know the Value of Your Machinery and Equipment Before an Auction

Case Study: Equipment Appraisal for a Lending Institution

Machinery and Equipment Auctions

Tags: auction value, auctions, certified machinery and equipment appraisal, equipment appraisal, Equipment Appraisals, equipment appraiser, forced liquidation value, Machinery and equipment auction, present value
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Auction Value: Forced Liquidation

In this post, 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 first two posts here and here. Today, we’ll tackle the topic of forced liquidation value.

Forced liquidation value assumes that a seller is being forced to sell his machinery, equipment, and other assets and wouldn’t be doing so if circumstances weren’t dire. Forced liquidation value is also known as auction value and implies a diminished sales value because of buyers taking advantage of a seller compelled to go to auction. The forced liquidation value of a company’s assets will always be lower than the fair market value.

An appraiser settles on an asset’s forced liquidation value by determining the fair market value and then judging the price for which the goods will most likely sell if there is not enough time to collect an adequate number of bids in an auction.

By: Present Value

Tags: auctions, forced liquidation value
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