How A Commercial Real Estate Appraiser Determines The Value Of Property

A commercial real estate appraiser, while doing the same fundamental job as a residential real estate appraiser, does have to assess an extra element which makes the task considerably more involved. This is the element of the potential income which the real estate can bring to the would be buyer.

With a residential appraisal, the appraiser will begin by doing a thorough inspection and analysis of the property. This is necessary to allow the appraiser to compare the property with other similar properties which will have sold recently in the same area. Although no two properties are ever exactly the same, and no one can ever account for the sentimental element which comes in to property buying, these figures allow the appraiser to value the property with a reasonable degree of accuracy.

The process with commercial property is very similar, and of course the sentimental aspect rarely if ever applies. What does apply, however, is the fact that a property can have different value to different businesses. This can be a function of location in terms of potential customers, proximity to other buildings used by that specific business, or of adaptability to the specific tasks which will be carried on by that business.

A residential appraiser will prepare a portfolio of photographs to back up the findings of the report, and will forward this to the potential lender. The next step is to analyze the prices which other similar properties have fetched in the same area. There is always enough real estate being traded for an average figure to some degree of accuracy, although with property there are always factors which depend on individual opinion. There can also be so much variation between properties, even in the same neighborhood, that the averages can only be a guide.

The commercial real estate appraiser will use a very similar method, although in many areas commercial property will rarely be traded. Many industrial complexes are built all at the same time, and the units sold even before the building has been completed. These units will then be occupied by the original buyers for decades. Because of this, commercial appraisals are likely to be even more variable than residential ones.

The big factor which the commercial real estate appraiser has to consider which is not considered by the appraiser of residential real estate is, of course, the potential income for the business from the commercial property. This is not easy to assess, as the majority of commercial premises are usable by more than one type of business.

Once this unique step has been completed, the appraiser can then prepare a report for the potential lender. This is inevitably more complex than similar residential reports due to the need for the potential income factor to be considered. The buyer of the property is then faced with the choice of accepting the lender's money, or trying another lender to see if they can give a more favorable valuation. With commercial property, there is almost never the sentimental element which can see residential prospects pay a premium price to secure a certain property. It will be a purely economic and business choice whether or not to accept the valuation of the commercial real estate appraiser.

Appraisers, Real Estate

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