Commercial Appraisals


Commercial Appraisals

Although commercial appraisals and residential appraisals may have a few things in common they are ultimately very different in how they are calculated. There are 3 types of commercial reports that we provide: Summary Property Evaluation, General Purpose Commercial Form, and a Commercial Narrative. Commercial reports tend to be longer than residential reports and the options above are listed in order from least complex to the extremely detailed Narrative commercial report.

In all reports, it is incumbent of the appraiser to use the approach or approaches to value that will produce a credible result.

The cost approach isn’t used often but it will help an appraiser determine the value of a property by calculating the cost of land, materials and labor needed to construct the same building on the date of the inspection.

The income approach is one of the most common approaches used to determine commercial real estate value. The appraiser makes use of multiple factors during this process including but not limited to, net operating income and capitalization rate.

The sales comparison approach is the most common approach in commercial appraisals as it is in residential appraisals. The sales comparison approach, which involves an analysis of recent transactions involving competitive real estate, reflects the attitudes and motivation of buyers in the market area. 

As stated previously, it is important to produce credible results using any and all approaches to value that are applicable to the subject property. Multiple approaches to value, while not always possible, ensure that the results are as accurate as possible. 

The most common reasons that you may need a commercial appraisal include:

-         To determine the owner’s net worth

-         To determine the value of the real estate when buying out a partnership

-         To determine market value in a private purchase

-         To help determine the price to list a property

-         To determine the market value for an estate as of the date of death