Business owners often need a commercial real estate appraisal for a variety of reasons, such as real estate sales and purchases, financing, property insurance, investment and marketing & listing purposes.
But what is a commercial real estate appraisal? Also known as a property valuation, a commercial real estate appraisal is simply the process of estimating the value – usually the market value – of a property for a specific purpose. The property may be a strata office unit, strata retail unit, strata warehouse unit, office building, industrial building, development land or a multi-unit apartment building.
Real estate appraisals can be critical to important business decisions. Consequently, it is crucial to know the process.
The commercial real estate appraisal process is lengthier than the residential process by a few weeks because of its complexity and highly subjective nature based on several factors.
Here are six significant things you should know about commercial real estate appraisals:
An appraiser typically visits the property being valued to conduct an inspection. The inspection can last as little as an hour or as long as several hours, depending on the size and complexity of the property. However, this is by no means the sum of the appraisal process. The inspection is only the beginning. Data on inputs such as public ownership, zoning records, demographics of the neighbourhood, replacement costs, rentals and comparable sales that impact the valuation also need to be compiled and analyzed. The findings are presented in an appraisal report, which can be as huge as 100 pages.
The appraiser is duty-bound to present as accurately as possible a valuation for your property, as he just might have to defend his or her position in court. Regardless of the information you present, he or she will do the requisite due diligence to verify that information. Be honest with your appraiser. You risk your credibility should you misrepresent any facts.
There are several documents that the appraiser will likely request to complete their appraisal, including income tax statements, blueprints and property tax bills. Though you may deem such documents private, you should comply with the appraiser’s requests. The appraiser is bound by client confidentiality and is not at liberty to divulge the contents of the report without your expressed permission. Being forthcoming will allow the appraisal process to move more quickly and smoothly.
Appraisers are mandated to maintain client confidentiality. Unless you indicate otherwise, the appraiser is not at liberty to share the contents of your report with anyone besides the intended user. So, for example, an appraisal requested by a lending institution to facilitate your purchase of a piece of property is solely for the eyes of the lending institution. Therefore, you would not be privy to it. If there are specific individuals with whom you wish to share the contents of your appraisal report, you should indicate this to the appraiser so that he or she can add those individuals to the report.
Property can either be appraised as at the date of inspection, as at a past date (a retrospective appraisal) or as at a future date (a prospective appraisal). Consult with your appraiser to determine the date that best suits your needs.
Commercial appraisals rely on one or more of the following three approaches to value a property:
If you require a real estate appraiser, Adlaw Appraisals can help you. Our experienced and knowledgeable appraisers are eager to help you secure accurate property valuations with a speedy turnaround. Contact us today for a consultation!
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