Commercial Appraisals are one area of our expertise. Co-owner and President, Paul K. Bidwell, holds the MAI and SRA designations of the Appraisal Institute and the ASA designation from the American Society of Appraisers, and is the Chief Commercial Appraiser.
Read on for general information to help you with your commercial appraisals.
The property viewing is where an appraisal starts.
To determine the true status of the property, it’s our responsibility to first complete a thorough property inventory. We must see features first hand, such as the number of rooms, number of floors, exterior features and interior features and so on, to ensure they indeed are there and are in the condition a typical person would expect them to be. Most importantly, we identify any obvious amenities – or defects – that would affect the value of the property.
Following the property viewing, we will determine if one, two or three approaches to value will be utilized. The approaches to value are the Cost Approach, Sales Comparison Approach and the Income Capitalization Approach.
Here, the appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is most appropriate when the improvements are newer and/or have been well maintained.
Sales Comparison Approach
Appraisers are intimately familiar with the communities in which they appraise. We innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are ‘comparable’ to the real estate in question. By assigning a value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Income Capitalization Approach
A third way of valuing a property is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property generates is taken into consideration along with income produced by nearby properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what’s being paid for the property even though it is likely the best indication of a property’s value. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or ‘bidding wars’. Regardless, the appraised value is typically used as a guideline for lenders who don’t want to loan a buyer more money than the property is actually worth. The bottom line is: An appraiser from Affinity Valuation Group, LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.