Two of the most important factors to someone obtaining a commercial real estate appraisal is speed and accuracy. If this is important to you during the appraisal process keep communication in mind. Communication, or lack thereof, is one of the factors that can contribute to delays.
Starting the Commercial Real Estate Appraisal Process
How long does a typical commercial real estate appraisal take? It could depend on lots of factors. The typical commercial real estate appraisal should only take 3-4 weeks once the work has been agreed to. However, lack of communication from the borrower can significantly slow down the process. What holds it up? When someone provides information that is incomplete, late or inaccurate.
What can you do to speed up the process?
- Provide very accurate information to the appraiser.
- Provide all existing and relevant documents that have been requested.
- Prompt communication is always helpful. When the appraiser asks a question, respond the same day and provide clarifications on anything that is requested.
What Goes into a Commercial Real Estate Appraisal?
A commercial real estate appraisal usually starts with a physical inspection of the property. Either the borrower or someone that represents them should attend the site inspection.
A walk-through of the property is done to check out both the interior and exterior of the building(s) and property.
The walkthrough does not include any sort of environmental inspection. Nor does the appraisal inspection include an assessment of the working condition of the mechanical or structural elements of the building.
This is an opportunity for the appraiser to ask any questions that arise. The types of questions that may arise could be about the property itself, development plans, development plan timelines, and operations of the business.
The appraiser will also takes pictures and include them in a written report.
Once the physical inspection is complete next comes the research phase. The information about zoning, regional, city and neighborhood data are all collected and considered.
Also researched at this time is information about comparable properties. These properties could be close, however, they could also be some distance away if it is difficult to find something comparable. For instance, factories that make automobiles aren’t that common, in this case another location may be considered as comparable.
Commercial Real Estate Appraisal | List of Considerations
When analyzing properties that may be comparable the appraiser will consider:
- The age of the buildings
- Costs and depreciation
- The cap rates for comparable investments
- The other buildings on the premise
- The condition of the buildings
- That the size of the site area
- Comparable sales
- The size of the buildings
Commercial Real Estate Appraisal | The Final Phase in the Process
During the final step of the appraisal process, all the information is gathered into a written report that includes:
- An overview of the most significant points about the property
- Definitions – The description section provides the scope of the report, definition of market value, information about the property and overview of the appraisal process
- Descriptions – This section goes into the analysis of the community, the neighborhood, the site, any improvements to the property and the highest and best use analysis of the property
- Valuation Conclusion – This section outlines the methodology used, and the values obtained through a cost approach, a direct sales approach, and an income approach. A final conclusion is also provided.
Once the written appraisal is complete, it is provided to both the lender and later to the borrower for their review.
The lender can then move forward with the completion of the loan process. Either party should direct any questions to the appraiser for clarification. The final written report includes a conclusion on the value of the property based on the appraiser’s analysis.
REM’s Streamlined Process
By staying on the cutting-edge, we streamline our processes and become more efficient in order for you to receive:
- More accurate valuations
- Faster turnaround times
- Consistent quality
- Reduced costs
- Improved communications
We would appreciate the opportunity to add you to our very long list of pleased clients. You can call us at (877) 453-0221 or click here to send us an email.