David is joined by Gregg Epstein from Perry Videx LLC, and discusses implied warranties on used equipment at auction, as well as the importance of pre-auction inspections.
About this segment of Blackbird TV
Recorded: September 10, 2020
Published: May 11, 2021
I’d like to introduce Gregg Epstein from Perry Videx LLC. You shared with me a document that your company put out called “the 8 Myths of Used Process Equipment,” and myth number one states that there’s no guarantee that used equipment will work. In Blackbird’s world, in the auction world, we sell everything as-is where-is, that’s what we have inspection for. However, there’s almost an implied sense when a piece of equipment is in line, and it was in a factory, and it was working, and the plumbing’s connected to it, and they were making widgets when the plant closed… there’s a certain amount of faith that buyers put in that knowledge when they buy at an auction sale, and clearly if we know that the piece of equipment was not functioning properly or needed a new spindle or it was broken or needs a new control panel, we’ll disclose that. Sometimes we don’t know. Sometimes we’re handed the keys and literally have no one left in the company that’s being liquidated to help us answer those kinds of questions. So, your company and our company we partner transactions together we lean on Perry as an expert to give us guidance for appraisals sometimes, and sometimes you’re buyers at our auctions, so you buy something as-is there’s no guarantee that used equipment will work. And it’s different from your perspective as an equipment dealer, so tell us what happens when you buy something in my auction, what do you do with it? What happens behind the curtains? So, you’re right and I may be a little different than a typical buyer, because we have the ability if something’s not working to fix it ourselves, but and that almost never happens, when you talk about the sense that the equipment was in line, and working when the plant shut down that the equipment’s going to work for us for me as a buyer. And for us as a machinery dealer, we have the added protection though that if there is an issue or even if there’s not an issue, even if we just want to recondition the piece, and clean it up and test run it, we have that ability so our world is a little different than the auction world in that our implied warranty and sometimes a customer will buy an explicit warranty from us, when they buy equipment that’s non-auction world from a dealer, in the sense is that we’re going to stand behind everything that we sell. My experience with auctioneers, the credible auctioneers, that if there’s a problem that no one anticipated, it’s in the auctioneers also best interest to try and get it resolved. There are several ways to mitigate the risk, one of the ways is to inspect the equipment before an auction sale, another way is to have, if there are really critical tolerances on a piece of equipment, to hire a testing service prior to the auction sale, have them go in, to the extent that they have access to the equipment. Remember no one’s warranty is that this piece of equipment will do what you want it to do in your process, okay? That which is implied is that this piece of equipment will work mechanically. [Right.] Not that your reaction will take place in this reactor, that’s up to you and your chemists. [Exactly, right, and I think they call that merchantability, for a particular purpose within the warranty world, and you know all the king’s horses can can help put Humpty Dumpty back together, but if Humpty Dumpty is really broken, and if what they’re trying to accomplish can’t work, then it has nothing to do with the equipment.] Right. [Okay.] That’s really on the buyer to be educated in that respect. What’s a little different for us is that we have more flexibility as a dealer perhaps than an auctioneer would in terms of being able to take a piece back because somebody made a mistake, and either give an equipment credit, or it’s a good enough customer just giving his money back because he’ll come back. In blackbird’s world we deal in a very compressed timeline, we need we need to get in get out, clear the floor move this stuff out, because our objective is different, and in the dealer world, you do have the benefit of more time to take the time to recondition or clean, or make adjustments, or put a different sweep blade on the bottom of that piece that you’re selling, to meet the customer’s needs. But in an auction sale it’s as-is where-is and it’s just the way it’s sitting on the floor. So to the extent that your myths state that there’s no guarantee that used equipment will work, is it serviceable in the event that the mixer motor is frozen, are these things serviceable to people that buy them at auctions? Can you help with those? Yeah. Absolutely, they’re serviceable. If a piece of equipment is in such disrepair that it’s not serviceable, that’s going to be pretty obvious, which is why either inspection by photograph at the bare minimum, or if possible inspection person for an auction scenario is so important, because you can pretty much see what most of the time the problem is. Again our world is different in that we have the flexibility to take it back where the auction works not but, they’ve had very very remarkably few situations, especially in the auctions I’ve been involved with, where we’ve had an issue with a client claiming that “hey, I didn’t know this wasn’t going to work,” but you have more experience than I do in that respect, Dave, but I’ve had very little pushback like that over the years for us. So the disclaimer “buyer beware” and “as-is, where-is” are important disclaimers in the auctioneers world, and when a dealer purchases something from us, and has the opportunity to go over it, you can offer that equipment with some kind of a warranty or guarantee after the fact, and there’s consideration for that. And depending on the equipment obviously depends on what that kind of markup is going to be, but the overreaching message I think that we’re getting to here is that people that are looking to buy a piece of used equipment are generally in the industry within the equipment space that they’re looking, and it will be evident from an inspection if things have been properly maintained. It will be evident from the the condition of the rest of the facility how that particular place ran their operation. So you can give a little bit of leeway and have some comfort in knowing that as a buyer, trust in what you see, ask really important, you know, ask really learned questions, and from an auctioneer’s perspective the last thing I’d like to leave is that, take advantage of the inspection period and go in look at these things and if it’s a complicated purchase, to your comment, please get an expert in there to look at the equipment before you make a purchase. Yes so I think all of the above is how you can buy confidently in an auction sale. My friend, Gregg Epstein, President CEO, Perry Videx, thanks for your time today. Great, thanks Dave. Thanks for having me.