A commercial real estate appraiser plays one of the most vital roles in a commercial property sale because the appraiser can influence the buyer’s decision. What the appraiser discovers during an appraisal can determine if a buyer will buy a commercial property or not. Among other approaches to determining the sale price of a property, the appraiser checks the value of the property compared to similar properties in the area. They also inspect the property's condition during the appraisal process.
If the buyer purchases the property with a loan, the appraisal report will show the loan-to-value ratio of the property. Therefore, an appraiser must ensure that the information provided is accurate. Staying ahead in the industry can help an appraiser provide more precise information. For instance, understanding the reasons for the property sale can point the appraiser towards the right things to look out for.
Reasons Why Business Owners Sell Their Commercial Real Estate
When purchasing a commercial property, it’s essential to consider why the owner is selling. This helps the buyer discover if the investment will be profitable. There are several reasons business owners would want to sell their commercial real estate. For instance, the property’s earning potential might be the reason a business owner is selling the property.
Some investors buy commercial properties to make the most profit as quickly as possible. When the property is at its highest possible income level, they sell it. Other reasons for selling commercial real estate include the business folding up, the property is fully depreciated, or it being under-leveraged.
Risks Involved in Commercial Real Estate Sales
Investing in commercial real estate can be profitable; however, it’s also risky. Commercial real estate investors and appraisers must view every deal objectively while keeping a cool head. Knowing the risks involved in commercial real estate sales can help them make better decisions. Here are some of the risks involved in selling commercial real estate:
- General Market Risk
- Lack of Knowledge
- Liquidity Risk
General Market Risk
The rise and fall of markets are tied to factors like inflation, interest rates, and several other macroeconomic market trends. Any of these factors can affect commercial real estate sales.
Lack Of Knowledge
Many investors don’t understand how the commercial real estate space works, and a lack of knowledge in the commercial real estate space can be very risky. This can make an investor sell a commercial real estate property when they shouldn’t and end up taking a loss.
Liquidity Risk
Commercial real estate properties are highly illiquid assets. This means that they can’t be immediately sold at market value. If a business owner desires to sell their commercial property by the end of the day, they will likely sell below market value. However, the illiquidity level varies according to market cycle, location, and property type.
How a Commercial Real Estate Appraiser Can Get Better in the Industry
A commercial appraiser must have the basic educational requirements to operate in the real estate industry. They must also have the required skills to fulfill their responsibilities. For instance, a commercial appraiser must understand the risks associated with the real estate market. They must also know the right things to look out for during an appraisal process.
But this may not be enough to stay relevant in the industry. Appraisers must be willing to improve their skills and expertise to stay ahead in the industry. Here are a few things an appraiser can do to keep improving:
- Get professional designation
- Stay updated with the commercial appraisal process
- Adopt the latest technology
Get Professional Designation
Commercial appraisers have different capabilities and backgrounds due to their educational backgrounds and experience. However, getting a professional designation will ensure an appraiser looks more reputable.
Stay Updated With the Commercial Appraisal Process
Change is inevitable in every industry. To stay relevant, every commercial appraiser must stay updated with the processes in the industry. They must be aware of all changes and implement them in their processes.
Adopt The Latest Technology
Technology has helped to improve many processes in the commercial real estate industry. Those who embrace technology stand a better chance of succeeding and standing out. Therefore, a commercial real estate appraiser who wishes to stay ahead in the industry must ensure they adopt the latest appraisal technology in the industry.
Valcre is an appraisal software solution many appraisers use for their processes. This end-to-end commercial real estate appraisal software solution helps appraisers keep things organized and streamlined. It also provides appraisers and clients with convenient access to high-quality, efficient, and easy-to-read reports.
Contact us today to learn more about its features and uses.