Desktop vs. Site Visit Appraisal: Tips for Making the Right Choice

Written by: Michael Schykerynec

(3 – 4 minute read)

One critical decision faced by lenders looking to have an equipment appraisal performed is whether to opt for a desktop equipment appraisal or a comprehensive site visit appraisal. Understanding the circumstances that warrant each approach is crucial for making informed decisions that align with the specific needs of your unique scenario.

SBA lenders specifically must be aware if the loan they are working on is a 7a or 504 loan. While 7a loans do not specify any guidance on whether a desktop or site visit appraisal is necessary, a 504 loan requires a physical inspection of the equipment, as per the SBA SOP 50 10 7.1: [1]

SBA requires that an equipment appraisal be obtained when used equipment is part of the Project and is either being purchased from someone other than an equipment dealer or being refinanced. The equipment appraisal needs to be a written document from a person who is qualified to provide a valuation, is independent of the transaction, and has performed an on-site inspection of the equipment. The appraisal must be dated no more than twelve months prior to the date of the application.

Lenders working on USDA loans will also require physical inspections of the equipment.

Desktop Equipment Appraisal

Desktop equipment appraisals are a cost-effective and time-efficient option, suitable for situations where physical inspection may not be necessary or feasible. This approach relies on data, documentation, and market analysis to determine equipment values without a site visit. Typical information that is required to accurately perform a desktop appraisal can include manufacturer, model numbers, mileage/hours, sizes/capacities, condition, custom work done, and much more, depending on the type of equipment being appraised. It is particularly appropriate for:

Standardized Assets:

When dealing with standardized equipment with readily available market data such as office, restaurant, or gym equipment, a desktop appraisal can provide accurate values without the need for a physical inspection.

Moving Assets:

For assets that are constantly on the move such as trucks and trailers used for long haul deliveries or construction equipment spread through numerous job sites over a vast area; these types of scenarios can be difficult to try and organize several inspections of the equipment throughout a large area.

Time-Sensitive Transactions:

In scenarios requiring quick turnaround times, such as time-sensitive loan approvals or refinancing, a desktop appraisal can be completed in a more expedited manner compared to a site visit.

Site Visit Appraisals

There are instances where a site visit appraisal becomes indispensable for a thorough and accurate assessment. A site visit appraisal involves a physical inspection of the equipment and may be more appropriate for the following scenarios:

Complex or Specialized Equipment:

For unique, specialized, or custom-built equipment where market data may be limited, a site visit allows the appraiser to closely examine the asset, consider its condition, and factor in any special features or customizations.

Risk Mitigation:

When seeking a more comprehensive understanding of the collateral to mitigate risk, a site visit provides firsthand insights into the different aspects of the equipment. In situations involving borrowers at risk of default or planning for asset recovery, a site visit is crucial for validating existing collateral as it provides firsthand insights into the condition, operational functionality, and maintenance history of the assets. By physically inspecting the collateral, lenders and investors can verify its actual presence, assess any potential risks or deficiencies, and determine its true market value.

The choice between a desktop and site visit appraisal hinges on the nature of the equipment, its value, and the specific requirements of the lending transaction. Lenders should carefully assess these factors in collaboration with experienced equipment appraisers to determine the most suitable approach for each unique scenario, balancing accuracy, efficiency, and cost-effectiveness.

[1] SBA SOP 50 10 Version 7.1, page 318