6 Things To Know About Being A Commercial Real Estate Appraiser
Several factors affect the valuation of a commercial real estate property: This includes location, size, and supply and demand. It’s the responsibility of a business and property owner to consider these factors when buying or selling a property. Carrying out a commercial real estate appraisal is an excellent way to determine the value of a commercial property.
The duty of a professional commercial real estate appraiser is to estimate the value of different commercial properties. They’re often consulted when a property is about to be developed, sold, insured, mortgaged, or taxed. Here are some crucial things to know to be a successful commercial real estate appraiser.
- Commercial Appraisal is Different From Property Inspection
- The Inspection Stage is Only The Beginning
- The Appraisal Report is Confidential
- It’s Essential to Be Forthcoming With Information
- There Are Different Approaches to Calculating the Value
- Establish a Convenient Date for The Valuation
Commercial Appraisal is Different From Property Inspection
It’s essential to know that a commercial appraisal is not the same as a property inspection. While property inspection is a part of commercial property appraisal, there are several other responsibilities a commercial appraiser must carry out. The appraisers also look into the property’s ownership records, rental receipts, demographics, taxes, and zoning. In practice, appraisers must check and take into account every factor that helps identify a property’s value.
The Inspection Stage is Only The Beginning
As stated above, a property inspection is a part of a commercial appraisal process. The appraiser visits the property to be valued for an inspection. Depending on the property's size and other complexities, the inspection may last from one hour to several hours. However, this is not all that’s done during an appraisal process.
In fact, it’s only the beginning of a commercial appraisal. The appraiser must still compile and analyze specific data. This includes, as mentioned above, public ownership, demographics, rental and lease data, replacement costs, property taxes, zoning, and comparable sales that may impact the property’s valuation.
The Appraisal Report is Confidential
Appraisal reports should always be confidential. This implies that the appraisers don’t have the liberty to share the report with a third party. The appraiser is only privileged to share the content of the report if the client indicates it in advance. Therefore, a client must officially state if they wish to share the report with specific individuals in the intended user statement.
It Is Essential to Be Forthcoming With Information
A commercial appraiser will likely need several documents to complete the appraisal process. This includes the client’s income tax statements, property tax bills, and property blueprints. Some of these documents are private.
However, the appraiser must be able to assure the client of their safety and confidentiality. Also, the appraiser must ensure they do their due diligence to verify every piece of information provided. All information must be as accurate as possible and should not be easily misinterpreted.
There Are Different Approaches to Calculating the Value
A commercial appraiser often relies on specific approaches for appraising a property. In fact, there are three main approaches a commercial appraiser can use. The appraiser may only use one of the approaches or combine them. Here are the three main approaches to value a commercial property:
- Direct Comparison Approach
- Income Approach
- Cost Approach
Direct Comparison Approach
The direct comparison approach requires the appraiser to analyze the sales data on recently sold properties that are comparable to the appraised property. These properties must be in the same or similar market area. The purpose of this is to estimate the property’s current market value relative to current market conditions as reflected in sales data.
The income approach considers the property's future income-generating capacity. This approach is typically used to evaluate income-generating properties such as hotels, and some office and apartment buildings.
The cost approach adds the depreciated value of the improvements to the estimated market value of the land. It’s an approach best suited for unique, one-of-a-kind real estate properties such as the White House and the Taj Mahal.
Establish a Convenient Date for The Valuation
Proper planning is key to a successful property appraisal. This includes choosing a convenient date for the valuation. The property can either be evaluated according to the inspection date, a future date, or a past date. A prospective appraisal is done according to a future date, while a retrospective appraisal is done according to a past date.
Reducing the Hassle of Commercial Appraisal With Technology
An excellent way a commercial appraiser can reduce the hassle of their processes is by adopting a quality appraisal software solution. Valcre is a top-rated appraisal software that provides appraisers immediate access to real estate data hosted in the cloud. This helps appraisers provide state-of-the-art reports to their clients.
Contact us today to learn more about the Valcre software.