No two purchases or sales are identical in real estate, and this especially rings true when thinking about the types of appraisal processes that a property may be subject to. While there are certainly similarities between commercial appraisals and home appraisals, commercial real estate appraisals are much more complex and time-consuming. If you are in need of a commercial real estate appraisal and don’t know where to start, you can start by reading about the basics. However, it is also valuable to note the differences between a commercial appraisal and a residential appraisal. If you’ve completed a residential appraisal but have to go through the process of a commercial appraisal, it is valuable to understand the differences.
A residential appraisal generally encompasses any area of personal property that needs a property or land evaluation. Home appraisals are typically used in purchase and sale transactions or refinance transactions. Because there aren’t as many complex rules for homes to adhere to, the process is much more straightforward. When it comes to a commercial appraisal for any type of commercial real estate, the rules are vastly different and can be contingent upon many different factors about your business.
You Can Expect Two Different Types of Reports
Because they are more detailed and can average as many as 100 pages of extensive market research and data, commercial real estate appraisals look and feel different than home appraisals. In fact, home appraisals may only be about fifteen pages. Many residential appraisals follow a similar structure, called the Uniform Residential Appraisal Report, making them less dense and more easily comparable to each other than commercial appraisals. Home appraisals consist of elements such as a street view of the home, an explanation of how the square footage is calculated, comparable sales used, market sales data, public land, and tax values. Commercial appraisals, being around 100 pages of extensive data, require much more data and research than what a home appraisal contains.
How the Values of Properties are Calculated
In residential real estate, appraisers will use the sale prices of similar properties to determine the value of a given real estate. After that is calculated, appraisers will add or subtract value based on certain unique features and other details of the property. This makes sense because lenders aren’t concerned about how much profitability that your real estate can generate based on the nature of the property. The actual asset in a commercial real estate appraisal weighs less heavily than in a home appraisal. For commercial appraisals, lenders are much more concerned with how much income a given property will be able to generate.
Pricing and Length of Time it Takes to Complete
Due to the amount of time and effort a commercial appraisal takes, the pricing is adjusted accordingly, furthering the discrepancy between the two types of appraisals. In short, a residential appraisal can cost hundreds of dollars, whereas commercial appraisals can cost a few thousand. The reason behind this is that a commercial appraisal is more time consuming, requiring more work and research. The timeline for a commercial appraisal depends on different factors, for example, a multi-tenant office building is more time consuming, however, the typical turn around is three to four weeks. Unfortunately, there can be delays that would extend the process to more than four weeks. Home appraisals can be finished in as little as two days or could take up to a week. Regardless, that is substantially shorter than a commercial appraisal.
If you have an immediate need for a commercial or residential real estate appraisal, contact us today! We are the most trusted appraisal company in New England and New Jersey, performing more than 10,000 appraisals every year!
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