From Analytics to Zoning – 3 Tips to Help You Understand Commercial Real Estate
Obtaining a commercial real estate appraisal requires gathering data to gauge the current value of the property. Not just anyone can make an appraisal of the property and in fact, most areas across the globe require that the person doing the appraisal have some sort of license or certificate qualifying them for the job.
Scott Everett, who is the founder and current president of Dallas-based mortgage lending company Supreme Lending, explains: “Commercial is very different from residential because much of the value derived from a commercial building is based on the rental rates received relative to the expenses paid out.” In other words, the underlying value of the real estate could factor less for a commercial property than it would for a residential one.
Researching the Property
Inspecting the actual property is just one part of the appraisal process. The appraiser must also search public records regarding ownership and zoning, consider details regarding area demographics, and compare facts regarding sales and rentals. After collecting all the data, a process that could take several weeks, the appraiser prepares a report with their findings.
It is the appraiser’s job to prevent anything about the property from being misrepresented. Because of this, it’s important that whoever requests the appraisal be forthcoming with details about things like taxes, architectural drawings of structures on the property, or surveyors’ maps of the property itself. Anything deliberately withheld will most likely be discovered later anyway, wasting time for everyone involved.
Who Uses Information Gained in the Appraisal
If an appraisal is requested for the purpose of financing, then the mortgage lender is most likely the client. Therefore, even if buyers plan to purchase the property, in some cases the appraiser will be under no obligation to share that information with them – especially if they are borrowers on other properties.
However if the owner request an appraisal, for instance to appeal a tax claim, then the appraiser can only share the findings with those whom the buyer asks to be identified in the report. Whether it’s just to confirm the true value of the property or what a lease is worth to someone renting it, share the reason behind requesting an appraisal is essential.
Share All Information with the Appraiser
It’s imperative to tell the appraiser why the report is being requested and how that information will be used. Regardless of the reason, you can be sure that your information will stay confidential. That’s because appraisers must adhere to the Uniform Standards of Professional Appraisal Practice.
Additionally, there are different types of reports which vary in degrees of data and expense. Who is asking for the appraisal, which parties will be privy to the information, and what information is being requested will impact not only which type of report best fits the purpose, but also any fees charged by the appraiser to do the job.
