The number one business question I am getting right now is, “Can you perform a ‘Desktop’ appraisal?”
Can appraisals be done via desktop? – Yes.
Should appraisals be done via desktop? – Well, that depends.
Any appraiser will tell you they’d prefer to see the asset(s) being valued, for a multitude of reasons. The biggest reason affecting the end user is that it prevents the appraiser from going down a path littered with assumptions that will be made when assets are not inspected. Not to mention piling up “Departure statements” related to USPAP[1] rules.
What it comes down to are a few key factors:
- How material is the value in the transaction, to the client and the auditor?
- What does the client want or need out of the information produced in the final appraisal?
- How reliable is the answer? i.e. what is the margin for error in this specific desktop appraisal.
- How long does the client have to produce the value? Can they wait it out or adjust later?
The current virus crisis is making us all second guess traveling, and yes, there are ways to enhance the normal Desktop process to raise confidence. StempleCrites has a few Desktop project on-going now. But everyone considered the key factors and understands the pros and cons. That said, StempleCrites is still traveling to see assets… it’s just a little harder these days.
PS. Insights into trends and values. We have been looking back at other major shifts in trends (e.g. 2008/9) trying to gauge what to expect. The economics of each industry, macroeconomic policy of each country, and so many different players acting in different ways make it hard to project how business and asset values are going to shift and for how long.
Coming into April we had a year-over-year (-1%) change in hard asset replacement values, which should affect fair values accordingly. We are expecting a further drop over the next 6 to 12 months.
Additionally, we are cautious of the impact of the various continued stimulus packages as we could expect some hyperinflation due to “printing money”, but we don’t expect that for 1 to 2 years, if it happens at all. Business closures and economics are going to wreak havoc on valuations in some industries like hospitality, food services, transportation, oil, and retail.
Either way, when it comes to desktop or other appraisal methods, it is not advised to rely on previously published trends or depreciation curves. The best practice would be to develop current specific industry and asset type curves that are the most accurate indication of location and industry.
[1]Uniform Standards of Professional Appraisal Practice
