Commercial Real Estate: Retrospective Appraisal- What You Need to Know

When it comes to valuing commercial real estate, we typically think about the current market conditions and the potential for future appreciation. 

However, there are times when knowing the historical value of a commercial property becomes just as important. This is where a retrospective appraisal comes into action. 

Commercial Real Estate: What Is a Retrospective Appraisal? 

A retrospective appraisal is a process used to determine an opinion of value of a property.

This type of appraisal looks at past market conditions, property improvements, and other relevant factors at a specific point in history to determine the commercial property’s value at that time.

Retrospective appraisals are usually used for purposes related to taxation, litigation, and estate planning.

Commercial Real Estate: Why Are Retrospective Appraisals Necessary?

Retrospective appraisals are sometimes necessary when legal and compliance issues arise or when you’re planning for the future and trying to understand long-term trends. 

Commercial Real Estate: When Would You Use a Retrospective Appraisal?

Here are a few scenarios where you might need a retrospective appraisal on your property.

Tax Appeals

One common scenario where a retrospective appraisal is useful is during tax appeals. They’re helpful when an owner thinks their property has been overvalued or needs to appeal their property tax assessment.

Commercial property owners may believe that their property has been overvalued for a specific tax year. In such cases, a retrospective appraisal can be conducted to determine the property’s value at that specific time. The value can serve as evidence to support the owner’s claim and potentially lead to reduced property taxes.

Litigation 

In legal cases involving property damage, loss, or divorce, retrospective appraisals can be invaluable. They help establish the commercial property’s value as of the date of the loss or separation, providing an objective basis for fair compensation or asset division. Additionally, when the government initiates proceedings to condemn or acquire private property for public use, a retrospective appraisal can establish the property’s value as of the date the petition was filed, ensuring that property owners receive fair compensation. 

Estate or Inheritance Tax

As mentioned earlier, retrospective appraisals are essential for calculating commercial real estate taxes.

When someone passes away and leaves behind commercial real estate, these appraisals help determine the property’s value at the time of the owner’s death, enabling accurate tax assessments.

Insurance Claims 

In the event of property damage or loss covered by insurance, a retrospective appraisal can be a crucial tool. The appraisal helps determine the property’s value as of the date of the loss, ensuring that the property owner is adequately compensated by their insurance provider.

Investing & Research

Beyond legal and tax-related purposes, retrospective appraisals also serve as valuable resources for analysts, investors, and economists. 

Historical property values are used to analyze long-term market trends, assess economic cycles, and predict future market behavior. 

These insights are instrumental in making informed investment decisions and understanding the dynamics of the real estate market when managing your real estate portfolio.

Real Estate Matrix is one of the Southeast’s premier commercial valuation firms and has participated in the valuation of billions of dollars in real property assets.

We would appreciate the opportunity to add you to our very long list of pleased clients. You can give us a call or click here to fill out our Free Quote Appraisal Form.