There comes a time during every relationship with a commercial property that an appraisal is necessary. The most common is the buying and selling of commercial real estate. But there can also be imperatives such as when taking out a mortgage on a property or making certain that your insurance coverage is sufficient. Aside from anything else, it’s a useful tool in keeping an eye on your investment and how it is fluctuating in value.
That said, as with most essential tools, an appraisal certainly isn’t free. Unless the appraisal is being performed by a lender, you’ll have to foot the bill yourself. Therefore, you need to factor how much a commercial appraisal costs into your operating budget.
Let’s review what you are likely to be looking to spend to get an accurate assessment of your commercial property’s true worth.
In Brief
So, how much does a commercial appraisal cost? On average, you’re looking at around $4000, but it can vary quite considerably. Depending on the property, it’s not unusual to see an appraisal raise as high as $10,000 and, in some cases, even higher. You certainly shouldn’t plan to spend any less than $2000.
However, this does leave some significant margin for your budgeting. What is it that can mean you’ll be paying $3000 rather than $25,000? Well, it comes down to more than just finding an appraiser that offers a more competitive pricing plan. Aspects of the property, the report you need, and the reason for the appraisal can all impact how much you need to pay. Therefore, it’s worth diving in a little deeper to get a more accurate account of the situation.
The Process
The processes involved with a commercial appraisal are very different to those of a private home appraisal. This is one of the reasons why the prices can vary significantly. It’s not just a case of an appraiser coming to inspect your property. That is just the first step in what — depending on your property and needs — may well be a long and research-heavy investigation.
As such, it’s important to be as clear as possible when making your initial quote inquiries with an appraiser. Give them details of the size and complexity of the property — a simple property may only take 30 minutes to inspect. The more your appraiser can understand about the type of processes they’ll need to perform in order to reach a valuation, the more accurate pricing you’ll receive. The last thing you want is unexpected records that can both take weeks to get back to the appraiser and wind up costing you more in labor charges.
The Variables
Given that there is a range of costs for a commercial property appraisal, this suggests that there are variables involved. By considering these and how likely they are to apply to your property, you can gain a better idea of whether you can expect your charges to be on the lower end of the scale or if you need to brace your budget for a hefty expense. So, what are some of the primary variables?
Report Types
The type of report you need tends to be the most immediate indicator of cost. Those that are generally the least expensive are known as restricted use reports. However, this type of report contains minimal information and only really has use as a metric for the landowner — there’s not enough data for lenders or investors to make use of it.
The most common and generally mid-priced type is the summary appraisal report. This will contain a moderate amount of detail on the factors that affect the valuation and is suitable for most situations — such as rental calculations in project leasing — in which an appraisal is required.
The most expensive report is known as a comprehensive appraisal. These take longer to produce, including all salient details of how the appraisal was conducted and the valuation reached. The amount of labor involved in creating this report is, of course, reflected by a jump in cost. There are relatively few reasons you’d need this level of detail — lenders and litigators are usually the only parties who request these.
Research Extent
While the type of report contributes to how much a commercial appraisal costs, it is still a relatively minor variable. The amount of work that goes into researching the aspects that contribute to a valuation can be a signifier of what you’re likely to be charged. The scope of work involved can depend greatly on everything from the type of industrial use the property can be used for to how much the population of the vicinity has changed since the last appraisal.
Depending on the reason for the report, the costs may take into account their research on local zoning and ordinance changes, the demographics and lifestyles of those likely to contribute to the income of the property, and what the fluctuations of the rental market. They may also review the impact of certain community elements — the crime statistics, workforce presence, and potential for local development in the future can be salient factors. Remember, too, that the easy availability of this information can impact the cost. If an appraiser has to go hunting for information and perhaps jump through bureaucratic hoops to obtain it, this is likely to raise the price.
Property Complexity
Some properties are simpler to appraise than others, and this is reflected in the cost of the appraisal. Even something as basic as the size of the property can be a contributor to cost. Remember, an appraiser doesn’t measure the size of your property themselves. If a full survey of the property hasn’t recently been completed and the boundaries aren’t obvious, this may need to be performed to get an accurate valuation, which in turn adds to the cost.
If you already own the property and you’ve added a lot of additional buildings and made significant improvements to the infrastructure or facilities, verifying the details of this and including them in the report may represent some complexity that is not present in most standard situations. This is particularly difficult if these additions are not a matter of public record or you don’t have adequate supporting documentation — indeed, without this it may not be possible to include them as part of the appraisal at all.
Minimizing Costs
We’ve looked at some of the things that can impact how much your report could cost. But there are a few things you can personally do to make sure you’re not unnecessarily overpaying for your commercial appraisal.
The first is simply discussing with your appraiser the intentions and recipients of the report. This will allow them to establish what the minimum amount of appropriate information to research and provide will be.
Your next aspect if you already own the property is to be honest with your appraiser. Don’t try and conceal anything from them that you feel might result in a lower valuation. They are experts in their field and through experience and research they are likely to discover issues anyway. There will be less time, hassle, and costs involved for everyone involved if you are open and honest about the issues.
Finally, make sure that all your relevant paperwork about the land is organized and accessible. The more information you can provide your assessor about the salient facts without them having to wade through piles of chaotic records, the better. By doing a little extra legwork yourself upfront, you can reduce the labor involved in the appraisal and potentially lower the cost of the report.
Wrapping Up
How much does a commercial appraisal cost? Well, it can depend on a variety of factors. Everything from the level of detail you need in the report to the complexity of the property can contribute to what you will need to pay your appraiser. That said, in order to keep it closer to the average $4000 mark, it’s wise to keep an open dialogue with your appraiser and do a little extra preparation work yourself.
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