Commercial real estate differs from residential real estate considerably. There are lots of things to consider when it comes to commercial real estate businesses. Of all the things, appraisal of commercial real estate is a tedious task. When you need to purchase a new commercial real estate or sell your existing commercial property, you need to find out its market value with the help of commercial real estate appraisers, employing appropriate commercial property appraisal methods. At the same time, it is important to ensure that you do not commit common errors during the appraisal process as it will increase hurdles in the valuation process. Here are some common mistakes that you should avoid when performing the valuation of your commercial property.
- Misrepresentation of facts and aspects: You should never try to misrepresent any facts or aspects related to your property with the intention to manipulate the valuation process in order to obtain a higher appraisal value. This tactic may backfire right away since real estate appraisers are adept in the valuation process and skeptical of initial value offers. If you are attempting to misrepresent any facts, they will figure it out quickly enough what the truth is and will no longer believe anything else that you have to say. This will affect your reputation and credibility adversely. So avoid misrepresentation of any facts or aspects related to your property.
- Withholding property details: Appraisers may ask you to provide certain documents such as property tax bills, drawings or sketches, and other details related to your commercial property. In that case, you should provide them all these details since it will make their work quicker and easier. Even if you may not be aware why an appraiser is asking for certain details related to the property, there is nothing wrong in providing details concerned with your property in question during the valuation process. Appraisers are not interested in increasing their paperwork deliberately; they ask for the necessary documents, which they think can help to speed up their work and make it easier to come up the right market.
- Misunderstanding the meaning of the appraisal process: It may take one hour or several hours to inspect a commercial real estate property depending on its size and complexity. Inspection of a property is just a part of the valuation process. In fact, it is just the beginning of the process. But, several business owners misunderstand it as the whole process and expect to get the value of their property immediately. After inspecting the property, appraisers collect all possible data from various sources about your property. These multiple sources include tax records, MLS listings, public ownership records, zoning records, and other essential records. Valuators consider at least three comparable commercial properties in the same area that have been sold out or have been listed for being sold recently. Apart from these, demographic lifestyle rentals, replacement costs, and rentals are also collected and all this data is combined together in order to arrive at a final market value of your property. So you need to wait until all these considerations are finished and not look for another appraiser thinking that your appraisal process is getting delayed after the inspection is completed.
- Suspecting or underestimating appraisers abiding USPAP: Appraisers need to adhere strictly to a certain code of ethics. All commercial as well as residential appraisers are obliged to comply with strict code of ethics known as Uniform Standards of Professional Appraisal Practice (USPAP), by law. If they fail to comply to the USPAP codes, it may result in the revocation of their certificate. In certain cases, appraisers may even face lawsuits. So if you ask an appraiser to perform a task which they refuse, it may be due to USPAP compliance issues. They cannot cross limitations introduced by USPAP so do not complain or underestimate their efficiency unnecessarily.
If you avoid these four common mistakes, you can have a fair and accurate value of your property as an outcome of commercial real estate appraisal.