Understanding more about the commercial real estate appraisal process – II
In a previous post, our blog spent some time discussing how first-timers looking to buy or sell commercial property, or even determine an accurate value for a commercial lease must understand that the appraisal process is decidedly different in this area than it is for residential real estate.
To recap, we discussed how the physical inspection of the commercial property in question is really only the first step in what can prove to be a long process. That’s because the appraiser will proceed to draft a comprehensive report outlining what they believe the property to be worth based on both the appraisal, and an examination of a substantial body of information, including data on similar properties, zoning records, and ownership records.
In general, this report will take one of the following forms:
- Restricted use report: These reports are the shortest in length and the most reasonable as far as cost is concerned with appraisers typically charging anywhere from $2,000 to $2,500 based on the size of the property and scope of the project. It should be noted, however, that these types of report may only be utilized by the client.
- Summary report: These reports occupy a sort of middle ground in that they encapsulate the data and analysis, may be utilized by any intended users (i.e., those people with whom the client wants to share the report) and cost around $3,000.
- Self–contained report: These reports provide the entirety of the appraiser’s data and analysis, but remain a relatively infrequent choice among clients.
It’s important to understand that an appraiser will typically help the client select the right kind of report at the outset. Furthermore, they are required to abide by the Uniform Standards of Professional Appraisal Practice, meaning a client should be confident that they will be supplied with an unbiased opinion.
Here’s hoping that the foregoing conversation provided some insight into how the appraisal process for commercial real estate works, and highlighted how those with any questions or concerns in this area should strongly consider speaking with an experienced legal professional as soon as possible.