FRequently asked questions
What is an appraisal?
A real estate appraisal is an estimate of market value as of a given date, performed by a qualified and certified or licensed real estate appraiser.
Who conducts a commercial real estate appraisal?
A certified general real estate appraiser in the state of California carries out this process. Think of this person as a property detective; the appraiser assembles various facts, statistics, and other information regarding the property. The data is then analyzed and used to develop opinions of value. A good real estate appraiser possesses sharp analytical skills, sound judgment, and strong communication. All real estate appraisers must follow a very strict code of ethics and rules created by the Uniform Standards of Professional Appraisal Practice (USPAP).
Why do you need a commercial real estate appraisal?
There are many reasons a commercial real estate appraisal might be conducted, such as:
- Helping prospective sellers determine acceptable selling prices, or prospective buyers decide on offering prices (negotiations between sellers and buyers);
- Assisting the underwriter in establishing a value of security for a mortgage (mortgage lending purposes);
- Supporting lease negotiations;
- For tax assessments;
- For appeals of tax assessments;
- Helping with business dissolution;
- Aiding in corporate mergers, issuance of stock, or revision of book value;
- For government acquisition of private property for public use;
- Assessing damages created by weather conditions or environmental contamination;
- Determining gift or inheritance taxes;
- Ascertaining the feasibility of a construction or renovation program;
- Estimating the liquidation value for forced-sale or auction proceedings;
- Counseling a client on commercial real estate investment matters, such as goals, alternatives, resources, constraints, and timing;
- Advising zoning boards, courts, and planners regarding the probable effects of proposed actions.
What is the overall commercial real estate appraisal process?
The process details vary depending on the nature of the project; however, the basic structure of the approach remains roughly the same across the board. First the “problem” is identified. This may include determining the intended use, relevant characteristics of the property, and assignment conditions. Second, the scope of work necessary to solve the problem is determined. The scope includes the amount and type of information to be researched and the analyses to be applied in an assignment. Third, relevant data is collected, verified, and analyzed. This includes market area data (general characteristics of the area/neighborhood) and comparable property data (sales, listings, offerings, vacancies, etc.). Finally, after following these steps and principles, the appraiser forms an opinion of value and creates an appraisal report.
In general, the full cycle of the commercial real estate appraisal process can take several days to weeks, when you factor in the inspection and subsequent investigative work. Fees can vary based on the size of your property, as well as the scope and nature of the appraisal.
What is market value?
Market Value is defined as the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale. It is assumed that the buyer and seller are typically motivated, well informed or well advised and each acting in their own best interest.
Who can prepare real estate appraisals?
A real estate appraisal should be performed by a state certified appraiser or licensed real estate appraiser. Other qualifications to consider would be amount of experience in the local marketplace, quality of referrals and affiliations with local professional organizations.
