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An Introduction to Commercial Real Estate Appraisal

You may have to go through the process of a commercial real estate appraisal while selling a commercial building. Simply put, the appraisal of a commercial property is an unbiased opinion of the property’s value. The appraisal of commercial real estate covers office buildings, retail spaces, and other commercial properties. 

Appraisals are primarily used to determine how much a particular property will sell in the current market. They are also of great importance in the underwriting process. Lenders generally look at how much an asset is worth before financing. So, they use appraisals to determine how much financing they can provide safely. An appraisal is also useful from the perspective of investing. 

Before investing in a property, you might want to know how much you should be paying for the asset. An appraisal also helps you after you have invested in the property. You can decide on the kind of investments you need in order to raise the value of your property.

Commercial property appraisal vs residential property appraisal

Although both commercial and residential properties may need appraisals, the processes used in them is different. The calculation of values in these properties differ in many ways. When it comes to residential properties, the appraisers determine values based on the selling prices of similar properties. Next, they add and subtract value according to the unique features and details of the property. 

In commercial properties, appraisals are done based on how much income the property can generate. Of course, there are other factors that are taken into consideration. The process of commercial property appraisals generally takes longer compared to the appraisals of residential properties. A major reason is the complexities involved in the process of commercial property appraisals. 

The similarities of residential properties make it much easier to determine their values by comparison. Commercial buildings are usually different from one another. The appraiser, therefore, takes more time figuring out how the different aspects of the property would affect its value. 

As commercial property appraisals are complex, they are much more expensive than residential property appraisals. The appraisal of a residential property typically costs a few hundred dollars. You would need a few thousand dollars in case of a commercial property appraisal.

Raising the value of a commercial property appraisal

Every owner of a property would always want to make the most of it. As an owner of a commercial property, you might be figuring out how to raise its appraisal value. In reality, appraisals are quite subjective. All certified appraisers would have different opinions on the properties’ appraised values. There are certain things you can do to increase the value of your commercial property appraisal.

A commercial appraiser would usually do their own research on a property. You might be asked to provide copies of important documents. They may include site plans, building plans, and current leases. You can speed up the process by keeping all the required documents ready in advance. Properties that are in excellent condition get higher appraisal values. 

So, make sure that your commercial property is well-maintained. If the building is older, make the necessary improvements. Income generated by the property is also taken into consideration by the appraiser. You can look for ways to generate more income from your property. Some of them are providing parking spaces for a fee or installing vending machines.