| The Benefits of an Appraisal (article by Vic Yosco) Whether you are an experienced all around horse owner or a first time buyer, there are many things to consider to prevent you from making costly mistakes in purchasing or selling your horses. The good news is there are ways you can reduce your chances of making them. While common sense tells us to get a pre-purchase veterinary examination, this is an important factor; this speaks primarily to the current health of the animal. It does not speak to the many other factors that determine a horse’s market value. By obtaining a professional Equine Appraisal, you are assured of less likelihood of wasting your valuable time and potentially a great deal of money down the road. There are three questions that are asked about an appraisal: Why do I need an appraisal? What is an appraisal? What are the factors in an appraisal? Why do I need an appraisal? You ask yourself the question, what is my horse worth? Am I paying market value for my horse? A certified appraiser will provide the expertise and knowledge to assess the correct market value of your horse. There are many reasons why certified appraisals are needed. It may be legal or judiciary in nature; it may be insurability or asset protection, or simply the true market value of your horse. Due to trends in the horse industry and the economy, the value in an appraisal is time sensitive. What is an appraisal? In order to determine the correct market value of a horse, an appraiser collects information regarding the pedigree, training, show results and confirmation. With the research attained, the information is correlated and measured against comparable horses. The market value is determined using unbiased, mathematical procedures very similar to that of a home appraisal. An appraisal is sometimes mandatory in situations of buying and selling a horse, for insurance purpose, taxes, estate planning, and litigation. There is an unknown IRS fact, that when donating or gifting a horse in excess of $5000, a certified appraisal is needed. What are factors in Appraisals? Determining Factors: Factors not considered in value of the horse: (1) Age (1) Assumption (2) Health History (2) Emotional Value (3) Conformation (3) Direct or indirect cost (4) Disposition (5) Pedigree (6) Training (7) Show Records (8) Progeny (9) Offsprings I also use a 100 pt. system which is based on 6 point Categories. Category Points (1) General appearance 15 (2) Head neck 10 (3) Forequarters 22 (4) Body 13 (5) Rear quater 33 (6) Way of going 7 100 pts Professional appraisals often make the difference between insuring horses for what they are really worth, and settling for an insurance company valuation, which is generally lower than the horse’s real market value. Remember, horse owners are not necessarily protected by an “agreed value” rider on their insurance policy. Value is a tricky issue. If the horse died and is insured, the policy may well provide for “market value” or replacement value. The insurance company has taken premiums based on some asserted value of the horse by the owner. It is rare that an insurance company conducts an independent appraisal prior to the issuance of a policy. However, it is not unusual for the company to question value at the time a loss occurs, which may require the owner to cover the claimed valued in order to collect the face value. Example. Owner purchases a horse for $45,000.00. The horse is insured for the value of the sale. The horse is a 2 year old stallion. A year later the horse is entered in several shows, it does very good and is entered in the breed’s National show. The owner sells a couple of breedings for the following year at $3,000.00 per breeding. The owner asks the insurance company to increase the policy to $200,000. The insurance company issues a new policy for mortality coverage with the face value of $200,000. The horse dies. The policy has language providing that it will pay replacement value not to exceed the amount of $200,000. Insurance company contests the value at the time of death. (Ref: State of Texas University of Law) This is just one example where an appraisal will become an important factor in deciding the outcome. |
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Type of Appraisals: For example, you have been playing polo for several years but you are finished with the sport. You want to donate your horse to a university polo program. What's it worth? You saw the perfect event horse listed in a national magazine in the classified. The asking price seems high. You don't know anything about the east coast. Is that an appropriate price for that horse where it lives and competes? Is that an appropriate price for a similar horse located in your area? You want to make an offer. Your horse just ran through a fence and was severely injured. You have to put him down. Your insurance company wants to know what to pay you. Last year you and your trainer found a young foxhunter in Galway. You paid for it, insured it, and await its arrival. But you've found a better one close to home and want to sell the Irish one as soon as it arrives. Where's the best market for that particular horse? |
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