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Comparing and Contrasting Full and Desktop Appraisals in Today’s Business Environment

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The inception of the COVID-19 pandemic has necessitated the adoption of creative ways to adapt fundamental business processes in order to keep the engines of commerce moving. One of these changes is making use of desktop appraisals when determining the value of tangible assets.

Desktop appraisals are appraisals that are completed without the benefit of a personal inspection of the assets that are the subject of the appraisal. They are often done using client supplied data such as an asset list with historical cost data and dates assets were placed into service, or with depreciation schedules.

Desktop appraisals offer many advantages-

  • Foremost, desktop appraisals minimize the opportunities for the propagation of the COVID-19 virus that result from personal interactions.
  • USPAP[1] compliant desktop appraisals can be written providing a measure of confidence in the reported results to the end user of the appraisal report.
  • The levels of research between full appraisals (including inspection) and desktop appraisals are quite similar.

The choice of valuation approach is the most significant concern when comparing the results of full and desktop appraisals. Of the three approaches to valuing assets, (1) Direct Market Comparison, (2) Income Approach, and (3) Cost Approach, the direct market comparison methodology is the least applicable to desktop valuations because it relies on comparisons between a comparable asset and subject assets, and thus requires personal observations of the subject assets. With the exception of assets that are used to generate rental income, I have found that the cost approach to value is the best suited method for desktop valuations.

Approximately 85-90% of the effort expended in developing a full appraisal of tangible property assets takes place at the appraiser’s desk. This means that there are similar levels of research conducted and effort expended with both a full appraisal and a desktop appraisal, and the resultant work product should also be comparable. The cost differential between the two is generally associated with the travel costs related to the site inspection included in the full appraisal.

In summary, desktop appraisals can be used as a credible alternative to provide valuations of tangible assets while minimizing the potential for propagating the spread of the COVID-19 virus.


[1] Uniform Standard of Professional Appraisal Practice.

 

Lee Diestelow, Sobel EAC Valuations 
lee.diestelow@sobelcollc.com