Understanding The Commercial Appraisal Process
Many people who are unfamiliar with the commercial appraisal process are often stunned after they are provided with a commercial appraisal quote. Most people are only familiar with the costs/fees and turn-around times of residential single-family home appraisals and many do not understand why it takes anywhere from two to four weeks to complete a commercial appraisal. Therefore, the following is to help people understand the commercial appraisal process.
A commercial appraisal takes many hours to complete, anywhere from 30 hours to several weeks. The level of detail and analysis differs significantly from a residential single-family home appraisal, where the analysis is performed on a form (10 to 20 pages) primarily checking and filling boxes. A typical commercial appraisal is an in-depth narrative report ranging anywhere from 60 to +100 pages. There are multiple valuation methods (Income Approach, Sales Approach and Cost Approach) where as a residential appraisal only uses the Sales Comparison Approach. Commercial appraisal reports feature detailed site and building improvements, diagrams & sketches, sales history & ownership, zoning information, regional and market area descriptions, flood plain analysis, age/life analysis, market analysis (supply, demand, vacancy, absorption and etc.), detailed published surveys, broker interviews, detailed highest & best use as vacant and improved, detailed valuation analysis, rent and sale comparables, expense comparables, cap rate comparables, adjustment grids and more.
Typically, commercial appraisal appraisals costs anywhere from $2,000 to +$5,000 dollars with turn-around times of two to four weeks. The commercial appraisal costs/fees vary primarily by the complexity of the assignment, availability of data, required turn-around time and scope of work. Remember, quality is more important than cost when choosing a commercial appraiser as this mean the difference between reaching a critical goal, securing a loan, closing a sale, reporting to investors, choosing the best asset or failing to achieve it altogether.