Step-by-Step Guide to Commercial Real Estate Appraisal
The commercial real estate appraisal process will provide an estimate of the market value of a property based on analysis and application of standardized appraisal methodologies. Suppose you want to invest in, buy/sell, finance, develop, and manage commercial real estate (office buildings, retail space, distribution centers, warehouses, etc.). In that case, you should conduct or obtain a property valuation to make informed decisions and minimize your financial risk. Commercial real estate appraisal is complex when compared to residential appraisals because of the income-generating attributes of the properties and multiple market factors.
It’s not just square footage; it is also economic trends, tenant leases, revenue potential, etc. According to appraisal and assessment professionals, appraisal reports are necessary for loan underwriting, tax assessments, and portfolio management. Thanks to new technology, such as protect, a company like Bowery Valuation can make this process more efficient by using its proprietary software and data analytics to provide high-quality reports in record time.
Define the purpose and scope of the appraisal.
The initial phase in commercial real estate appraisal is to identify the purpose of the appraisal. Are you looking to acquire a value for a loan, sale, insurance, or tax? The type of value being determined will depend on what the appraisal is for (e.g., market value, investment value, liquidation value, etc.). This stage is also when the scope of the appraisal (property type, detail level, etc.) is determined. Bowery Valuation even uses technology to facilitate this from the start, allowing for easy communication, detail, and execution.
Engage a Qualified Appraiser
It’s important to obtain a licensed and experienced appraiser. Seek an experienced appraiser who holds credentials such as MAI (Member of the Appraisal Institute) and has expertise in similar Commercial Real Estate Appraisal sectors. Bowery Valuation enhances this process by integrating skilled appraisers with innovative technology, resulting in appraisal services that are quicker and more efficient than those offered by previous providers.
Collect the Property Information
The appraiser will collect information about the property, including location, size, condition, zoning, and income potential (if applicable). During the initial collection of information stage, the appraiser often reviews property records, leases, and operating statements. Bowery Valuation has improved this process by offering superior data-collecting solutions, allowing for reduced manual errors and a faster timeline.
Conduct an inspection.
The appraiser will set up a final appointment to visit and inspect the property. An inspection involves examining a property’s condition and features; it also may focus on what aspects may affect the property’s total value as determined by such things as structural issues or unusual amenities. An appraiser may also consider the area and know about market trends and comparable properties. Bowery Valuation has integrated mobile technology to ensure local data is collected and validated in real-time during the inspection, generating a thorough data schedule.
Analyze the Market and Comparable Data
Appraisers assess value utilizing the sales comparison, or market approach, income approach, and cost approach. The Sales Comparison Approach looks at trying to find sold comparables of like properties (recently sold properties that are similar to the subject property), the Income Approach looks at the income-producing potential of the property and is often used for rental properties like multifamily, office, or retail properties, and the Cost Approach looks at what it would cost today to build the property (less depreciation) if the subject property was not there. Bowery Valuation uses cutting-edge analytics to perform comparable data searches and analysis of this data quickly and efficiently, delivering a better value.
Reconcile the Value and Generate
The report After the appraiser considers all valuation approaches mentioned above, they will reconcile their findings to determine the reported value. This will be documented in a written report that includes the appraisal’s findings, methodology, data, and conclusions. Bowery Valuation produces well-structured reports that adhere to compliance standards and are presented in user-friendly formats so that they are easy for clients to understand.
Review the Appraisal and Use It.
After the appraisal is finalized, parties involved in the transaction will review the report to ensure it accurately reflects their interests and that its findings are relevant to the transaction. Finally, an appraisal can serve a number of purposes throughout the transaction. It can be utilized for negotiations, financing, or simply making an informed decision for future investment. When utilizing Bowery Valuation services, clients can expect a quick turnaround for the appraisal to allow them to efficiently present themselves and ultimately execute timely transactions in difficult and competitive environments.
What is Bowery Valuation?
Bowery Valuation shakes up the commercial real estate appraisal process by combining expert appraisers with proprietary technology. Their platform allows quality appraisal reports to be generated faster than traditional means. Automated data collection means that appraisers can focus on the analysis, valuation, and development of a high-quality appraisal report. The automated process allows Bowery Valuation to complete appraisals 40% faster than traditional appraisals! This innovative approach is a game-changer for investors, lenders, and property owners alike.
Conclusion
Unless this is your first commercial real estate appraisal (maybe because you were always given one or never purchased before), an appraisal on a commercial real estate property is essential to provide insight into that property’s value, which directs your investment decision process. The process discussed here, in combination with working with innovative firms like Bowery Valuation, provides you the best chance to support a reliable, efficient, and fast appraisal process.
