What happens during the Appraisal Process

We gather the property and assignment details for your appraisal request and provide you with a free, no-obligation quote of the cost of the appraisal. Once you have selected us for the assignment and we are fully engaged, our appraisal process begins.

The commercial real estate appraisal process is a systematic approach used to determine the value of a commercial property. This process is essential for various reasons, including financing, estates, sales, taxation, and insurance purposes. Here’s an overview of the steps in the commercial appraisal process and what it typically provides:

1. Define the Purpose

Establish the reason for the appraisal, such as sale, purchase, refinancing, or tax related.

2. Engagement and Agreement

The appraiser and client agree on the scope of work, fees, and the timeline for the appraisal. This is documented in an engagement letter.

3. Gather Data

The appraiser collects relevant data, which includes:

• Physical Data: Information about the property’s size, location, condition, and any improvements.
• Market Data: We research many comparable databases including our own proprietary database for recent sales and leases of comparable properties. We analyze macro and micro data to evaluate market trends and local economic conditions.
• Financial Data: When applicable, we examine historic income and expense reports as well as comparable data.

4. Inspect the Property

The appraiser visits the site to assess its condition, verify sizes (measure buildings), and gather additional information that might affect value.

5. Interview Market Participants

Many appraisers do not regularly “talk to the market.” We know that this is a very important part of the appraisal process. This includes brokers, developers, and investors.

6. Analyze the Data

We subscribe to numerous comparable databases locally and nationally (including our own proprietary one). Researching, confirming, and using the best comparable data is key to this process.

The appraiser analyzes the data using one or more of the following approaches to market value:

• Sales Comparison Approach: Compares the property to similar properties that have recently sold in the area.
• Income Capitalization Approach: Evaluates the property based on its ability to generate income.
• Cost Approach: Estimates value based on the cost of replacing the property, minus depreciation, plus land value.

7. Reconcile the Values

The appraiser considers the values derived from each applicable approach and then reconciles them to arrive at a final value estimate.

8. Report the Findings

The appraiser prepares a detailed report that includes:

• A description of the property and its surroundings.
• An explanation of the appraisal methods and the reasoning behind the value conclusion.
• Supporting data and documentation.
• The appraiser’s final opinion of value.