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TOP THINGS YOU SHOULD KNOW ABOUT COMMERCIAL REAL ESTATE APPRAISAL

23 January, 2014
/ in Blog

Business owners, especially small business have a lot to digest when it comes to commercial real estate. Commercial appraisal can be very subjective with much of the value derived based on rental rates received relative to expenses paid out. In other words, if you are looking to get an appraisal done on a piece of commercial property— because you want to buy or sell it or you want to establish a value of a lease or lodge a property tax appeal—there could be a bit of a learning curve in knowing what you are about to embark on.

A commercial real estate appraisal can be complicated–from knowing what to ask for as well as what to provide to the appraiser–here’s what you need to know.

1. The Inspection – Being of the Appraisal Process

Inspection is only a small portion of the appraisal process. Depending on the size and complexity of the property to be appraised, it might take less than an hour to several hours to inspect. Certified appraisers research public ownership and zoning records, investigate demographic and lifestyle information, and compile comparable sales, replacement costs, and rentals. They then analyze information collected as it relates to the value of the property and finally write a report on their findings.

2. Facts, facts and facts

Appraisers are professional skeptics – they will seek to verify anything that you tell from other sources. This is important as appraisers need to think about defending their opinions in court. If you misrepresent anything, the appraiser will discount the credibility of anything else that you say.

3. Don’t Withhold Information

Appraisers have no interest in unduly expanding their work files but they do need certain information to make an accurate appraisal and the more information you provide, the faster the assignment can be completed. You will probably be asked for a complete income and expense summary for year-to-date operating information, and a complete prior year operating statement. It is best to provide whatever information you can.

4. Strict Code of Ethics

Appraisers must follow the Uniform Standards of Professional Appraisal Practice, which, among other things, requires them to provide an unbiased opinion. Failure to follow this might result in disciplinary action from the state, including revocation of an appraiser’s certification. If an appraiser refuses to do something that you ask for, it is probably because of the obligation to adhere to these ethics.

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