Equine Appraisal: The Value of our Horses
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I am frequently asked, “What is an Equine Appraisal?” There are many definitions of appraisals in general terms. The shortened version for equine appraisal purposes is as follows: “An appraisal is not a precise measurement, nor a guess. It is a relative estimate (opinion) of value based on supporting facts.” I always like to compare equine appraisal with real estate appraisals. The two are basically the same, with a few exceptions, of course.
CHOOSING AN EQUINE APPRAISER
You may be asking, “How do I find a qualified equine appraiser?” If you find yourself looking for an appraiser, you can of course, call me, and I would be happy to help you or work with you to find an appraiser in your area. Even though equine appraisers are not as common as other occupations in the horse world, such as trainers, veterinarians, etc., the horse owner can find a qualified appraiser either through local organizations, horse magazines, equine internet sites, word of mouth or by contacting the American Society of Equine Appraisers. If you have livestock other than horses, the American Society of Agricultural Appraisers is a good place to find a qualified appraiser.
When hiring an appraiser, look for someone who has experience with the types of horses you are having appraised. Some appraisers specialize in a particular breed; others have a diverse background, and offer appraisals for all breeds and disciplines. Don’t be afraid to ask for their resume and references. If the appraiser is legitimate, they won’t mind, and in fact, will expect the request. I always offer my resume and references up front, along with my credentials, so the potential client doesn’t have to ask for it. Once the decision has been made to go ahead with an appraisal, you will want to get the agreement in writing with all the particulars; when, where, price and any special conditions. Everything should be clear up front before the actual appraisal is underway. As with any business, the smart appraiser covers all the bases concerning their trade. And, as with any true business, the appraiser will work diligently to grow and offer the best service possible. Honor and hard work go along way!
How does the equine appraiser value a horse? Many things are taken into consideration when appraising an animal for value. Bloodlines, conformation, soundness, temperament, what the horse will be used for, all this and more are taken into account. You can have two horses of the same or comparable breeding, yet they can be valued much differently. For instance, let’s say we have a brother and sister from the same bloodline, a year apart. Value will differ as the two horses mature, depending on their individual conformation, soundness, temperaments, training, and, in later years, whether they are bred or not. Obviously, the value can change if a horse is gelded or a mare is barren, assuming they are of breeding quality. On the other hand, there are mares and geldings that hold their own in the show ring, and retain their value until they are retired from the show ring or injured. Some horses, particularly in the racing field, are outstanding athletes, but are less than brilliant when retired to the breeding farm. A certain famous racehorse of the seventies comes to mind! You can also have the other extreme, where a mare or stallion are mediocre performers, but contribute significantly to their breed later in the breeding shed.
Determining the value of a horse is very similar to valuing a house. The appraiser’s job is to determine the market value of the property. Equine appraisal uses similar principles of valuation based on the USPAP – Uniform Standards of Professional Appraisal Practice. The owner of the horse(s) must decide what the intended use of the appraisal is going to be, re: bankruptcy, estate settlement, to purchase insurance, collateral, determine sales price, etc. and it is the appraiser’s job to establish the type of value to be used, i.e., Fair Market Value, Liquidation, etc.
Values to be considered are:
· Fair Market value (Most common value for equine appraisals)
· Retail value
· Liquidation value
· Wholesale value
· Consignment value
· Replacement value
A common question I here is, “Why do I need an appraisal on my horse?” There are several good reasons for acquiring an appraisal. More courts, judges, insurance agents and other professionals are requiring an independent appraisal by a certified appraiser that has no connection to the animal being appraised. If you were to come to court for say, a bankruptcy, and bring your own trainer to give an appraisal on the animal, he or she may come up with a lower price for the horse(s) than a certified appraiser. At the other end of the spectrum, a trainer or unlicensed “appraiser” may be persuaded to give a higher value to an animal for sale or insurance purposes. This is bias. Appraisers have been trained, and taken an oath to follow the USPAP guidelines for developing and writing appraisals that are ethical, objective, unbiased and based on diligent research using sound economic principles and practices.
The most common reasons to acquire an appraisal are:
· Divorce Settlement
· Donation value
· Insurance Purposes
· Tax Purposes
THE APPRAISAL PROCESS
The appraisal process will generally start with any records the owner has on the horse, including pedigree, show record and health records. Whether the horse is registered or not, will not change the process by much, however, it can be easier to value a horse with a pedigree and show record, than one that has neither. The more information an appraiser can start with, the easier it will be to make a sound evaluation on that particular animal.
The next step is to evaluate the horse in person. This means the appraiser will travel to where the horse is stabled to see the horse in person. The appraiser will carefully examine the horse, paying particular attention to any flaws or characteristics to the breed to determine whether the horse represents his or her breed with correct conformation and movement What kind of training has the horse had, or is receiving? What is his/ her temperament? The appraiser will most often take pictures of the horse from every angle, including any blemishes or conformation faults. The appraiser will more than likely use a conformation and markings chart to record any faults, blemishes and markings the horse may have, which will go into the final report. Every detail, no matter how small will be noted so the appraiser can make a fair valuation.
Sometimes, due to distance or other factors, the appraiser may need to evaluate the horse without actually seeing the animal. Even deceased animals can be appraised. In these circumstances, the appraiser will need as many still pictures of the horse as possible, showing front, back and both sides, and if possible, a recent video of the horse being ridden (if applicable.) The video must be of good quality and show the horse performing each gait and whatever specialties he or she may perform, including highest level attained, for dressage, jumping, cutting, etc. I prefer the horse to be ridden, but if it is being valued only as a broodmare or breeding stallion, it is not always necessary. A bonus would be to get a video of the surroundings and where the horse is housed.
Some appraisers will record notes on a recording device to use later, when writing the report. A few appraisers are even offering full narrative reports, along with a written report.
THE APPRAISAL REPORT
Once the appraiser leaves the stable or ranch, the real work begins! The appraiser will then research local breeders, auction houses, and private sales to see what similar horses have sold for and conduct an extensive search on pedigrees and other pertinent information on each horse. I think this is where there are misconceptions in the equine appraisal process. It is a very time consuming, extensive procedure to come up with a fair market value for the animal(s) being appraised. It is not a guess, but a well-informed, fair estimate based on all the facts and theory. There is so much to consider when appraising the value of an animal. An appraiser must be thorough in his or her research.
My reports are extensive, with letters, pictures, charts, copies of veterinary records, pedigree, (If horse is registered) show records, (if any) detailed description of appraised horse(s), general information, any other pertinent documentation, references or other professionals used in compiling information, value estimate(s) and my qualifications, all in a professional report format. Professionalism is important, as these reports may come into play in a courtroom or need to be reviewed by professionals in non-horse related occupations. The report must be readable to not only the horseman, but also the layman and professional as well. If an appraiser is called upon to testify as an expert witness, he or she will need to have the material and expertise to back up their findings.
The cost of an appraisal can be deducted as a business expense if you have a training stable, ranch or farm that is in the business of training, showing or breeding horses. With the cost of good horses skyrocketing, independent equine appraisals will become increasingly more important in insuring, selling or otherwise valuing our four-legged assets!
Author: Angel S. Gnau
Provided by HG.org
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.