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Understanding more about the commercial real estate appraisal process

Given that most of us are familiar with the concept of appraisals as they relate to residential real estate, we might be tempted to extend this same understanding to the realm of commercial real estate. In other words, we might think that appraisals are essentially the same regardless of whether we're dealing with residential or commercial real estate.

As it turns out, this couldn't be any further from the truth, as the appraisal process is conducted for very different reasons and in a very different manner as far as commercial real estate is concerned.

In general, experts indicate that the appraisal of a commercial property takes into account not just the value of the actual building, but such factors as expenses paid versus rent received, and the amount secured in sales of comparable property.

"Commercial is very different from residential in the fact that appraisals are much more subjective in nature," said one expert.

In light of this reality, the question naturally arises as to what those first-timers looking to sell or purchase commercial property, or simply establish an accurate value for a lease should keep in mind.

First, experts urge people in these situations to understand that actual physical inspection of the property by the appraiser is only the first step in a much larger process that can span several weeks.

Indeed, once this inspection is completed, the appraiser will then begin examining zoning and public ownership records, as well as assembling data on similar properties and other pertinent information.

They will then compare and contrast this sizeable body of information with the property in question, drafting a comprehensive report detailing what they believe its value to be.

We will continue to examine the commercial real estate appraisal process in future posts. In the meantime, if you have any questions or concerns related to commercial real estate, consider speaking with an experienced legal professional as soon as possible. 

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