10 Essentials of Commercial Real Estate Appraisals

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If you’re looking to hire a professional real estate appraiser to do the job right, call Cincinnati Commercial Appraisers at (513) 808-4691 or visit their website for a free quote.

commercial appraisers in cincinnatiThe appraisal is looked upon by those outside of the appraisal business with mysticism. A qualified commercial appraisers is commissioned, he or she goes away, and several man hours later, turns up with a report that says the property is worth X.

Few can understand the inner workings and sometimes this lack of understanding can lead to problems. Many will call into question the valuation and even go as far as complain about fees and the value they receive for money paid. This article will clear things up, a bit.

We present below 10 essentials that anyone looking to hire commercial appraisers in Cincinnati must know to avoid problems:

1. Be upfront about everything
An appraiser has to gather a wide gamut of data in order to make an objective assessment of value. This may include looking at old property tax bills, blue prints, revenue records – if the property is currently or has been in use commercially and any cost-related records associated with running the property. It may be tempting to hide or avoid presenting certain documents, especially if you feel it will have an adverse effect on the appraisal. This should never be done because it only adds to the problem of coming up with a suitable value for the property.

2. Site inspections is only the start of the appraisal process
An appraiser will invariably take a look at the property in person. During this visit they may take photos, scribble little notes on observations and may ask you a few or several questions about the property. This is the on-the-surface part of the appraisal process.

Once they complete this task they typically have to go on a data hunt, looking at public ownership records, market variables, tables detailing like for like sales in the same area, income statements, maintenance costs and often the zoning records for the area. This is a lot of work and so it is wise to allow for time in the compilation of the appraisal report.

3. Don’t lie
This is a very blunt way of saying don’t misrepresent the facts about your property. An experienced appraiser will know all they need surface-wise to make a value judgment. There’s therefore no use coloring information about the property with half-truths or even shades of meaning. The clear direct approach will get the appraiser working as quickly as possible, returning if all goes smoothly, a comprehensive appraisal report.

4. Cincinnati commercial appraisers have to adhere to strict standards (for your benefit)
Gone are the days when any ole Joe or Jane could turn up at your door with a clipboard and start the appraisal process. Today appraisers are qualified; maintain professional membership to several sanctioning bodies and have to maintain a certain code of conduct and ethic is executing their jobs. The most recognized body of ethics and standards are found in the Uniform Standards of Professional Appraisal Practice (USPAP).

5. Engagement starts with the client
An appraiser can only begin their work after they’ve been engaged and this process starts with the client. As such the terms of the engagement are usually ironed out at the beginning. Failure to do so can lead to problems when the final report is ready. For example, if you are borrowing money to buy a property and the lender (a bank) commissions an appraisal; you will not be privy to the final report contents. Sure, you may be a party to the overall transaction, but the engagement for the appraisal is between the bank or client and the appraisal firm.

6. Be clear about intended users
This point dovetails with number 5, above. If you engage an appraiser, you must keep in mind at all times that he or she may be bound by a professional code of confidentiality to release the report to a third-party. That’s even if the third-party is your bank. It’s best to specify these intended users at the outset so that when the final report is compiled, they can be designated as persons or entities privy to view the details therein.

7. Understand the types of report
Once the appraisal process is done, a report will have to be compiled detailing the findings and the ultimate judgment of value on the property itself. These reports take three forms and each cost slightly different amounts and have a variation ion scope.

The most expensive is the full-narrative and contains all the complicated data findings that accompany a large and complex-use property. Pricing is not set in stone but a good guideline is anything above $5,000. The second type of report is the summary narrative. These cost anywhere between $3,000 and $5,000 and are not as extensive as the full.

They do however provide for a wider application in terms of users and are sometimes used by federal agencies as well as finance institutions. The least expensive is the restricted report which usually takes the form a letter. These are requested for personal use and typically will not be relied upon by important institutions such as banks.

8. Scope of work and eventual report are separate
The more expensive appraisals will involve data collection, sifting and eventual compilation of an opinion. This work, however, is quite separate from the scope of work that is conducted in the early part of the appraisal process. An appraiser could for instance conduct an assessment and in the final analysis, choose any of the three report formats to present the information.

9. Date of valuation can impact perceived value
An appraiser could issue a valuation report on the 25th yet the value of the property is adversely affected because of an event that occurs shortly after. In this case, any third party relying on the appraisal may call for a fresh look at the property. Appraisers take a fluid approach to assessment which helps to overcome the problem of unforeseen events. An appraiser will either issue a valuation on the basis of a specified date of inspection; based on a past date – a retrospective appraisal – or n the basis of some future date – a prospective appraisal.

10. Property Interest is important
An appraisal will be done to fulfill some commercial purposes, regardless of the type pf property. In other words, there is usually some monetary transaction that comes after the value of a property is assessed. From this perspective it is important to establish with the appraiser, the scope of interest that you have in the property. Fee simple interest” assess what a property is worth free and clear, without liens or any other legal tie-ins. “leased fee interest” tells you what the property is worth if its occupied by a tenant. This is an important distinction if the property is being used for income purposes. Then there is property that is going to be leased, in which case an appraiser needs to tell you what the “leasehold interest” is.

These 10 points should all come together to give you a better understanding of appraisals, how much they cost, their scope and how one could be useful to you. Use them well.

Get a FREE quote today
If you’re looking to hire a professional real estate appraiser to do the job right, call Cincinnati Commercial Appraisers at (513) 808-4691 or visit their website for a free quote.

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Cincinnati Commercial Appraisers – 5 Important Tips

Cincinnati commercial appraisers are trained to compare conditions which affect market values for a variety of property types. To get the fair market value for a house, land or commercial property, an appraiser is hired to complete an inspection. Usually, a real estate appraiser is hired for purchase or refinance transactions. Some commercial appraisers watch over the jobs of people. Each county may have different experience and prerequisite for real estate appraisers.

cincinnati commercial appraisers

You could also be curious about this: http://en.wikipedia.org/wiki/Real_estate_appraisal