The Challenges Of Commercial Real Estate Appraisals

When a person needs their home appraised, an appraisal can easily determine its value by comparing it to other homes in the area. Appraising homes is simple compared to commercial appraisals. Yet, the lender will need an appraisal when you buy or sell commercial property. If you are buying or selling commercial property, you might want to learn a few of the challenges appraisers face when valuing these types of properties.

Finding Comps

When an appraiser values a home, they do so by looking at recent home sales in the area. They look at similar houses to determine the home's value at this time. Finding comparable homes is usually fairly simple for an appraisal when valuing a home. When it comes to commercial comps, finding them is difficult. Most commercial properties are unique and different from all other buildings and properties. Therefore, finding properties to compare a business to is not simple to do. Additionally, fewer commercial properties sell than homes. As a result, commercial appraisers might not be able to use comps in these appraisals.

Determining the Value by Revenues

Therefore, a commercial appraiser might turn to a different method for assessing a commercial property. This method is valuing a property by considering its revenues. How much money can the property earn? Is the buyer purchasing the business or just the property? If they purchase the business, how much is the business name and reputation worth? These are some of the things an appraiser will consider as they complete a commercial property appraisal.

Assessing the Property's Actual Value

After considering all the things listed here, a commercial appraiser must determine a fair amount for the property's value. When they determine the amount, the amount could affect the sale of the property. The buyer will not want to pay more for the property than it is worth, and the lender will not want to loan more than it is worth. The seller might think it is worth more than the appraised value. Coming up with an accurate amount is definitely challenging, but it is a necessary step in the process of selling a commercial property.

As you can see, commercial real estate appraisals are more difficult to determine than residential appraisals. If you want to buy or sell a commercial property, you will need an appraisal, and you will need to find a reputable company that specializes in commercial appraisals.