A commercial real estate appraisal is undertaken for a variety of reasons: to establish the valuation for mortgages or other loans, determine an appropriate sale price, help settle an estate in the event of death or divorce or assess property taxes. A commercial real estate appraiser will determine the highest and the best use of the commercial property after which the value can be determined. He will examine the property for its capability to provide a positive annual return on the capital. He will determine this by considering the rent the property can be expected to earn, the market value of the land or site and its resale worth.
Commercial real estate appraisal is quite unlike residential appraisals – more subjective to the appraiser’s interpretation, as they are based on the value of the property including its income generation and location. In other words, if you’re looking to get an appraisal done on a piece of commercial property—perhaps because you want to buy or sell it or even because 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’re about to embark on
7 things you need to know about commercial real estate appraisals:
Is your appraiser a Certified General appraisal license holder?
A Certified General appraisal license from the state the subject property is located in is required to value commercial property in most states. It also reflects the professionalism of the commercial real estate appraiser while making the client comfortable to deal with the appraiser.
Has your appraiser assessed a similar property before?
A commercial real estate appraisal may involve simple assignments such as appraising office or industrial buildings, to complicated properties, including land trust conservation easements or going concern values. Most states’ follow the appraisal certification Competency Rule whereby the appraiser is required to disclose a lack of experience and/or knowledge to the user of the appraisal before accepting the assignment. In case the appraiser discovers he does not have the required knowledge and expertise, at any point in the evaluation process, he must stop working on the assignment immediately so that he does not come up with an incorrect assessment.
Inspection is a small part of the appraisal process
If you are wondering about the duration of the appraisal process, you need to understand that length is dependent on the size and complexity of the property to be appraised. Accordingly, inspection may take less than an hour to several hours. In fact, inspection is only the beginning part of the appraisal journey. Appraisers research public ownership and zoning records, investigate demographic and lifestyle information, and compile comparable sales, replacement costs, and rentals. Appraisers often need documents up front such as (but not limited to) rent rolls, leases, income and expense statements, building plans, building costs, surveys, floor plans, etc. The sooner this information is provided to the appraiser, the quicker the appraiser will be able to complete the assignment. On receiving all this information, they analyze it as it relates to the value of the property, and then submit a written report on their findings. All this activity may take several days or even weeks.
Don’t keep your appraiser in the dark
The appraiser is at liberty to ask you to provide a property tax bill, a set of drawings of the property, income statements, and other things. You should provide this information, whatever you can. The more you provide him with information the quicker he can complete the assignment. If you later dispute the appraiser’s value options and produce additional information that you did not furnish earlier, you have wasted valuable time.
Appraisers Must Adhere to a Strict Code of Ethics
Sometimes an appraiser may refuse to do something you want. This could very well be because he is adhering to the Uniform Standards of Professional Appraisal Practice, a strict code of ethics that appraisers must follow. A failure to follow this and he will face disciplinary action from the state
Who are the Intended Users?
It is important that your appraiser know you will see the appraisal. For example, if you are purchasing a property that would mean sharing the appraisal with the seller, your lender and your local property tax appeal board. These people need to be called out in the appraisal report. They are the only ones who should use the report.
The Date of Valuation is important
Appraisers can appraise property as of the date of inspection, as of a past date (a “retrospective appraisal”) or as of a future date (a “prospective appraisal”). Dating the evaluation is very important in case a property loses it valuation for some unexpected reason.
RD Clifford Associates
RD Clifford Associates is a name to reckon with in the realm of commercial real estate appraisals in New York, New Jersey, and Pennsylvania. We have been operating in this business since 1990, handling commercial real estate appraisals of different sizes and for different purposes. Our service covers New Jersey, Metro New York, and Philadelphia as licensed and certified operators in New Jersey, New York, and Pennsylvania. We are a full-time appraiser along with staff appraisers. The time we would need for the appraisal would depend on the complexity of the property and scope of the assessment. There are no time limits for the validity of the appraisal as the value is based on a specific date of the appraisal. Our fees vary widely depending on the subject, scope and intended use of the report. Our goal: to consistently provide exceptional quality in research, appraisal, valuation and consulting services, at competitive market rates. Our customers across the business and service spectrum include churches like First Church of Christ Scientist, Financial Institutions like ABN Amro, Columbia Bank and Commerce Bank, Lending & Mortgage Companies like Amerisave Mortgage Corporation and CIT Small Business Lending Services and Government Agencies like New Jersey Department of Transportation and New Jersey Green Acres Program. Even Law & Professional Firms, Municipalities, Real Estate Appraisal & Services and US Corporations like Hertz Corporation and Nissan Motors Acceptance Corporation are witness to our expertise and experience.