Commercial Property Appraisal
Commercial Property Appraisal
There has been some confusion over the years as to how commercial and residential property appraisals are different; and many people think that they are exactly the same. Professional property appraisers such as Abbe Edelman can easily explain how the two are indeed similar as well as how they are different. In principle, they are the same since they basically have the same goal of valuating property in mind. But that is pretty much all they have in common. Even though the basic concept behind a property appraisal is the same for both residential and commercial property, each is used for different purposes.
How is the Property Used?
For the most part a residence is used simply to live in. A commercial property appraisal can be rather complicated since each business location may have a different purpose and sometimes one location may actually have multiple purposes; all of them legit. A property appraisal will need to consider more than just the location of say, an office property. They also have to consider the amount of space in the area (both commercial and residential), the average vacancy rate for usable office space, how long an office usually sets vacant in that region and any new offices that are possibly being introduced into the market. Basically, this is just supply and demand. By looking at these factors, a property appraiser can determine whether or not the market is going to need more or less office spaces as this can influence their conclusion. This is one point in which a commercial appraisal and a residential property appraisal differ.
Property Interest
How the property is used will be discussed between the property owner and the appraiser. The owner will need to offer full explanation on the intentions. Depending on the owner’s answer, the property appraiser will conduct his property appraisal in a certain way. The least expensive appraisal is the “fee simple interest”. This appraisal will just yield a price for the buildings and the property. If it is going to be rented out for tenants to use, then it is necessary to obtain a “leased fee interest” appraisal. This appraisal method will yield the value of the property if it is being rented out to tenants. If the owner wants to take a look at the property from the perspective of the tenant, ask for a “leasehold interest.” This will offer the owner a way to know what the rental property is worth to the tenants. When discussing the matter with the property appraiser, make sure to discuss with them some of these particulars to obtain the fairest value for the property.
Why Do you Need an Appraisal?
A residential appraisal may be obtained because a homeowner needs a loan, insurance claims, and diminution in value, purchases, divorce, sales, taxes of all sorts or to find the fair market value. On the other hand the purpose of a commercial appraisal is necessary if the property is being donated, needs a tax reduction, cases of litigation or mediation, insurance value, or a wide variety of other reasons.
What things will the Appraiser Consider?
In one way, the commercial appraisal is very similar to the residential appraisal. The appraiser will consider all of the surroundings before offering a value. Just like a residential property appraisal looks at the neighborhood a home is in, a commercial appraiser will look at the surrounding businesses when doing an appraisal. However, with the commercial property appraisal, he will consider things like the zoning records, history of public ownership, comparable sales as well as many of the demographic information in the area.
How is the Property Used?
For the most part a residence is used simply to live in. A commercial property appraisal can be rather complicated since each business location may have a different purpose and sometimes one location may actually have multiple purposes; all of them legit. A property appraisal will need to consider more than just the location of say, an office property. They also have to consider the amount of space in the area (both commercial and residential), the average vacancy rate for usable office space, how long an office usually sets vacant in that region and any new offices that are possibly being introduced into the market. Basically, this is just supply and demand. By looking at these factors, a property appraiser can determine whether or not the market is going to need more or less office spaces as this can influence their conclusion. This is one point in which a commercial appraisal and a residential property appraisal differ.
Property Interest
How the property is used will be discussed between the property owner and the appraiser. The owner will need to offer full explanation on the intentions. Depending on the owner’s answer, the property appraiser will conduct his property appraisal in a certain way. The least expensive appraisal is the “fee simple interest”. This appraisal will just yield a price for the buildings and the property. If it is going to be rented out for tenants to use, then it is necessary to obtain a “leased fee interest” appraisal. This appraisal method will yield the value of the property if it is being rented out to tenants. If the owner wants to take a look at the property from the perspective of the tenant, ask for a “leasehold interest.” This will offer the owner a way to know what the rental property is worth to the tenants. When discussing the matter with the property appraiser, make sure to discuss with them some of these particulars to obtain the fairest value for the property.
Why Do you Need an Appraisal?
A residential appraisal may be obtained because a homeowner needs a loan, insurance claims, and diminution in value, purchases, divorce, sales, taxes of all sorts or to find the fair market value. On the other hand the purpose of a commercial appraisal is necessary if the property is being donated, needs a tax reduction, cases of litigation or mediation, insurance value, or a wide variety of other reasons.
What things will the Appraiser Consider?
In one way, the commercial appraisal is very similar to the residential appraisal. The appraiser will consider all of the surroundings before offering a value. Just like a residential property appraisal looks at the neighborhood a home is in, a commercial appraiser will look at the surrounding businesses when doing an appraisal. However, with the commercial property appraisal, he will consider things like the zoning records, history of public ownership, comparable sales as well as many of the demographic information in the area.