What an ag lender needs in a farm equipment appraisal

Start with the premise, not the number

A costly mistake on an ag collateral file is an appraisal written to the wrong premise. Fair market value answers what a machine sells for between a willing buyer and a willing seller with reasonable exposure. Orderly liquidation value answers what it realizes in a sale the lender controls, over a limited marketing period. Net orderly liquidation value takes that figure down by the cost of getting there. Those are different questions and they produce different numbers on the same tractor.

An operating line secured by machinery, an equipment term loan and a workout are not the same credit, and they do not all want the same premise. Tell the appraiser what the credit is and who will read the report before the engagement is written. We confirm the purpose, the intended user and the intended use in writing, as USPAP requires.

Itemize at the serial-number level

A lump-sum figure for "farm equipment" cannot be reconciled against a security agreement, traced to a UCC filing, or tested by a reviewer. Every unit belongs on the schedule with make, model, year, serial number, hours and condition, photographed, and valued individually, with the total built up from the units.

Serial numbers are the practical reason. They are what ties the appraisal to the borrower's asset list, to the lien filings, and to whatever gets inspected a year later. On farm assignments they also catch the two things owners most often get wrong in good faith: an implement that was traded and never removed from the list, and a machine already pledged elsewhere.

Heads, implements and precision technology get valued on their own

Combine heads, planters, tillage, hay tools and grain handling are separate assets, not accessories. Rolling them into the machine they attach to overstates the machine, understates the recovery, and makes the schedule impossible to reconcile if a unit is sold. The same applies to guidance and precision technology: receivers, displays and autosteer carry value when they convey with the machine, and licenses and subscriptions do not always transfer. We confirm what is actually included rather than assuming, and the report says which is which.

Set the effective date on purpose

Agricultural equipment demand follows the crop calendar. Tillage and planting equipment moves differently in the weeks before planting than in midsummer; combines and heads move differently before harvest than the following spring. Broader farm income matters too, since commodity prices and input costs decide how much iron is replaced in a given year.

So the effective date is a decision on a farm file. A renewal needing a value as of a fiscal date and a purchase needing one as of closing are different assignments. The report states the effective date and what market conditions applied on it.

Write it so the reviewer never has to call

The audience is credit, then loan review, then an examiner, often a year or two later, working from the file alone. That reader needs to see which approach led, what comparable evidence supported it, what adjustments were made and why, what was verified in person, and what was not. Where something could not be verified, such as a replaced hour meter or a subscription that may not transfer, the report names the limitation.

We are independent, so the number is not shaped by the deal. Advance rates and discounting are the lender's decision; ours is to deliver a supported value and the reasoning behind it.

For the full scope of what we do on lender assignments, see lending and collateral appraisals.

See our agricultural and farm equipment appraisal specialty →