What is Examined in a Commercial Real Estate Appraisal?

When a commercial real estate appraisal is done on a commercial property, the appraiser is looking to provide an estimated value of the actual property.  Such appraisals are most often performed when a commercial property is bought, sold or developed. Some of the things that they look at are the environmental and physical attributes that surround the building.  Additionally, an appraiser will take a look at the type of area that the property is in as well as the type of architecture that the property has.  Just about everything about the property is examined by the appraiser. 

What is Reviewed in a Commercial Appraisal?

When you have an appraisal:

• The appraiser will review any renovations that have been done to the inside or the outside of the building as well as any main highways, roads, or bridges that may be next to the property. 
• The appraiser will also take photographs of every angle of the building, including the interior of the building. 
• After they have completed their initial observation, then a report will be compiled that will assess the entire property. 
• Thorough qualitative and quantitative methods will be employed in order to adequately estimate the true value of the property. 
• Comparable home sales, location, and income potential will all be taken into account as the appraiser puts together a comprehensive report for the property owner.   

The Appraisal Process

During a commercial real estate appraisal there are several ways in which commercial property is assessed – there is the cost approach, the sales comparison approach, and most importantly the income capitalization method. 

• The cost approach bases its calculations on the value of the property being equal to how much it would cost to be replaced.  In essence it says that the total value of the property cannot be any higher than the total amount it would take to make a similar property at the same site. 
• The sales comparison approach bases it analysis on the value of similar properties that have recently been sold in the marketplace.  The income capitalization gives the most concise information on the actual market value that the commercial property has the potential to make. 

Regardless of  which method is used by the appraiser to better discern the estimated value of a property, once the appraiser completes his or her report, there is enough information for the current owner or potential investor to better understand how the property being appraised will have a positive or negative impact on their real estate portfolio in the future.

Getting Help

If you have questions or concerns about a commercial real estate appraisal, speaking with a commercial real estate attorney can help. Your attorney can guide you through the process of buying real estate from start to finish, helping to ensure you make an informed and educated decision about your property.