Common Process Plant Appraisal Mistakes and Errors
Appraising a process plant is not the same as valuing a warehouse or an office building. These facilities—sawmills, refineries, food-processing plants, chemical factories—combine land, specialized buildings, and integrated machinery in ways that make valuation both fascinating and complex. Done well, an appraisal captures how real buyers and sellers in the marketplace think about these properties. Done poorly, the results can be misleading, costly, and sometimes indefensible. After reviewing many factory and process plant appraisals, one clear pattern emerges: the same types of mistakes keep showing up again and again. These errors aren’t just technical—they can swing values by millions of dollars and undermine trust in the entire process. Here’s a look at the most common problem areas.
9/4/20252 min read
1. Methodology Gone Wrong
Scope of Work & Highest and Best Use (H&BU): Too often, appraisers say a plant’s best use is as an operating facility, but then value it as if it were just a generic warehouse. This mismatch leaves out major components of value, like machinery and equipment.
Cost Approach Errors: Misclassifying heavy industrial plants as “light industrial,” leaning too heavily on generic cost guides, or double-counting depreciation all result in replacement cost estimates that don’t reflect reality.
Sales Comparison Errors: Using sales that happened after the appraisal date, or picking comparables that aren’t really comparable—like shuttered mills—leads to values no buyer or seller would recognize.
Income Approach Errors: Many appraisals skip the income approach altogether because it’s “too complex,” even though the property clearly produces income. Others try to force-fit specialized operations into generic models, with assumptions about vacancy, expenses, or cash flows that don’t hold up.
Intangible Property Issues: Shortcut methods, like applying broad ratios from public companies, can inflate or distort intangible values—especially when they rely too much on management’s subjective input.
2. Data That Doesn’t Hold Up
A valuation is only as strong as the data behind it. Yet it’s common to find:
Asset lists riddled with errors—phantom assets, missing costs, or inconsistent ages.
Over reliance on distressed sales or government-incentivized deals that don’t represent normal market conditions.
Statistical analyses that show wild variation in sales but are still presented as “tight ranges.”
When data is shaky, the conclusions can’t be trusted.
3. Reports That Don’t Tell the Full Story
Even when the math is right, reporting can break down:
Contradictory statements, like saying one approach gets “primary weight” but later giving all approaches equal weight.
Missing explanations for adjustments, making it impossible to follow the appraiser’s reasoning.
Assumptions and conditions hidden in the fine print, or compliance errors in certifications.
Clarity and transparency aren’t just best practices—they’re required by professional standards.
4. Professional Shortfalls
Finally, some problems go beyond numbers:
Taking on assignments without the right expertise.
Accepting client forecasts at face value without testing them.
Stretching or misrepresenting qualifications.
These issues not only damage credibility but also cross into ethical concerns.
Why This Matters
For taxpayers, lenders, and assessors, process plant appraisals carry high stakes. A misclassified building type, a skipped income approach, or a poorly chosen comparable can mean the difference between a fair tax burden and a distorted one.
The good news is that these problems are avoidable. With the right expertise, process plant valuations can be rigorous, transparent, and defensible—helping decision-makers trust the numbers.
If you’re dealing with the complexities of valuing a sawmill, refinery, or other specialized facility, don’t leave it to chance. Contact me for help navigating these appraisals with clarity and confidence.