DMC Appraisals

What is a commercial real estate appraisal?

A commercial real estate appraisal is an unbiased opinion of the value of the property. At their core, appraisals are used to determine what a property will sell for in the current market, but they are also important in underwriting. Lenders generally will not lend more than an asset is worth, so an appraisal helps these lenders determine how much financing they can safely provide.

An appraisal is also a useful tool from an investing perspective. Before you purchase the asset, it can give you an idea of how much you should be willing to pay for the asset in the current market. Additionally, after you have the asset in your portfolio, an appraisal can also help you make decisions about what sort of investments or renovations it makes sense to add to the property.

What are the different methods for Commercial Real Estate valuation?

In total, there are three different methods a commercial appraiser can use in order to determine the value of a property, being a Cost Approach, Income Approach or Sales Comparison Approach.

Why Would I need a real estate appraisal?

So, why do you need a commercial real estate appraisal? Generally, a commercial real estate appraisal is an unbiased valuation assessment to help you determine the value of a commercial property. You may need a commercial valuation for many reasons. The most common reasons that one would need a commercial valuation are to:

To help determine fair selling prices & fair offer prices
Bolster lease negotiations
Transfer the ownership of commercial real estate property
Assist lenders in establishing the amount of a loan and aid underwriters in establishing a value of security for mortgage lending purposes
Assist in corporate mergers, issuance of stock, or revision of book value
Accommodate with business dissolutions
Support legal matters, such as contract disputes, environmental damages, eminent domain proceedings, probate court, etc.
Determine a property’s assessment for tax purposes, such as appealing a tax assessment, inheritance, charitable donation, or gift taxes
Advise zoning boards, courts, and planners regarding the probable effects of proposed actions
Estimate the liquidation value for forced-sale or auction proceedings
Ascertain the feasibility of a commercial construction or renovation program
assist commercial investors in making informed decisions on purchasing securities, setting budgets and timeframes for renovations, establishing rent prices, etc.

Why are commercial property appraisals important?

A commercial property appraisal helps you determine the fair market value of your property. No matter the purpose of the appraisal, the estimated commercial valuation indicates what someone on the open market would be reasonably willing to pay for said site. Knowing the fair market value can help you determine how to price your rental fees or sale price. A commercial appraisal for real estate can help you get a better loan from a financial institution. In addition, a real estate commercial appraisal can help you better understand your financial standing. If the fair market value is greater than you anticipated, you may decide to invest in your property through upgrades, or perhaps invest elsewhere. Lastly, appraisals are important to financial institutions. A commercial property appraisal helps lenders understand the property’s value and how much they can loan.

What are the fees associated with ordering an appraisal?

Commercial real estate appraisal cost can greatly vary depending on the property, requirements, intended purpose, and experience of the commercial appraiser. The intended use of the commercial valuation is the most significant factor in determining the amount of work needed, the level of research and analysis, the detail required, and the best type of commercial appraisal report to establish the property’s market value estimate.

We will provide a consultation at no charge to understand the specifics about your property and reason for an appraisal. During that initial phone consultation, we will gather enough information to be able to provide you a fixed fee for services.

What do commercial appraisers look for when determining a property’s value?

When commercial appraisers assess a property, they analyze various factors and investigate multiple data points. The specific items appraisers look for will fluctuate depending on the type of appraisal and best-suited appraisal method.

Generally, commercial appraisers look for the following when assessing a property:
Public ownership records
Zoning records
Demographic information
Property details (building and lot size, condition, functionality, accessibility, amenities, special features, etc.)
Recent comparable sales
Current market trends
Replacement costs (a cost estimate to construct a building comparable to the building undergoing the appraisal, while using current prices, building standards, and materials)
Rental information (number of renters, rent prices, length of lease agreements, etc.)

What do I need to provide for my appraiser?

Usually, after a commercial appraiser comes to view the property, they will do their due diligence and follow it up by doing some research on the property itself. They may ask you to provide copies of several important documents, including building plans and site plans, your current rent rolls, any current leases and financial statements. Our ability to fully understand all financial and operational aspects of a client’s company enables us to better achieve the valuation objective and support our conclusions. You can speed up the process by having this information on hand when needed in the process.

Who can see the results of the commercial appraisal report?

Rest assured; commercial appraisers must maintain client confidentiality and cannot release the results of a report to outside parties without your permission. When scheduling the commercial real estate appraisal, you should go over who you want to use the report at its completion. For instance, you may want to share the commercial appraisal with the seller, your lender, and perhaps your local property tax appeal board. The commercial appraisal report will identify these people or parties as the only ones with the authority to use the report.

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