Whether you’re buying or selling a business, refinancing a loan, or taking out property insurance, chances are you’re going to first have to get your property appraised. Commercial real estate appraisals can be a nerve-wracking process, but they are a necessary part of doing business.
Put simply, commercial appraisals are designed to determine the value of your property, but the reality can be a lot more complicated. Both more time-consuming than residential appraisals and more subjective, commercial appraisals can have you stressed out for weeks. The more you know about the process before you begin, the more you can set your mind at ease.
Here are 5 important things to know:
1. An Appraisal Can Only Be Carried Out by a Licensed Appraiser. Before a person can carry out commercial real estate appraisals, they must be officially licensed. An appraiser typically earns a bachelor’s degree, completes 300 hours of required coursework, and undertakes 3,000 hours of work experience before they become licensed. The whole process usually takes three years.
2. There are Three Principal Approaches to Determining Value. Your licensed appraiser will determine the property’s values in one of three ways:
• Cost Approach: The appraiser determines how much it would cost to build the property from scratch. This approach is becoming increasingly rare.
• Income Capitalization Approach: The most popular approach in commercial appraisals, this method relies on the use of different investing calculations, such as net operating income and capitalization rate, to arrive at the value.
• Sales Comparison Approach: More often used in residential real estate, this approach compares the property to similar units in the area.
3. Commercial Real Estate Appraisals are Lengthy, Multi-Step Processes. While the first step of the appraisal – the inspection – may take only an hour or two, this is just the beginning. After inspecting the property, the licensed appraiser will carry out a copious amount of research, studying public records and locating relevant statistics. They will then write up a full report. The process may take as long as several weeks.
4. The Final Report is Confidential. The appraiser is only obligated to share their report with the client who ordered the appraisal. It is not a matter of public record.
5. It Will Not Benefit the Owner to Withhold Information. In order to complete their work, the appraiser will likely ask the owner for several documents such as tax statements. Withholding these papers will only slow down the process. Similarly, there is no advantage in misrepresenting any information about the property. The appraiser will likely determine the accurate information and the owner could find themselves in legal trouble.
A commercial real estate appraisal can be a lengthy, complex process that can leave you feeling stressed out. Working with a licensed appraiser who you can count on makes it that much easier. Whatever your commercial appraisal needs, Appraisals Unlimited offers professional, reliable services that will set your mind at ease.
Contact us today to get started.
If you’re interested in learning more about these solutions or need an appraisal today, don’t hesitate to contact Appraisals Unlimited, either by calling 781-449-7600 or emailing us at office@appraisals-unlimited.com.
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