Once a commercial appraisal report has been ordered, you should begin preparing for the commercial appraisal process.  

As the owner of the commercial property that is the subject of this appraisal, the commercial appraiser will contact you to request permission to visit the property for an onsite inspection. The appraiser also will request documents that are needed for the completion of the appraisal process. 

Here’s how to prepare for a commercial real estate appraisal to ensure the outcome of the appraisal process is timely, fair and credible. 

 

Commercial Appraisal Documents

There are specific documents that a real estate appraiser will request from property owners during the initial phone call to schedule an inspection. 

The type and quantity of these documents will vary based on several factors, including:

• the intended use of the appraisal
• the status of the subject property (such as whether it is leased or subject to a pending sale)
• the use of the subject property
• any special conditions, such as proposed renovations

If the subject property is under contract for sale, or listed for sale, the appraisal will ask for a copy of the purchase agreement, letter of intent and/or listing information.

 

 

If the subject property is leased, the appraiser will ask for copies of the related leases or rent roll. This document should include the name of the tenant(s), date occupied, date lease expires, current rent, expenses paid for by the tenant, future rent increases, options to renew and other relevant information). Additionally, the appraiser will ask for details regarding the property operating expenses for a period of time, so that the appraiser can accurately estimate operating expenses going forward.

The appraiser may request a sketch or layout of the subject property, indicating the specific rental units, mechanical systems, common areas, loading facilities, rest rooms, stairways and elevators, etc. This will enable the appraiser to present a good picture of the subject’s utility and offer insight into possible alternative uses.

It’s best to collect and forward the requested data via email, so that there is a permanent record of your having sent the information and so that the appraiser receives the information in a timely manner.

 

Additional Appraisal Documents or Exhibits

There are other documents that may be specific to only certain types of properties or may be relative to specific characteristics of the subject property. These may include:

• the size, age and construction of underground storage tanks
• details regarding any easements (public or private) that affect the subject property
• data related to other structures on the site such as cell towers or billboards
• data related to the area surrounding the subject, such as details of new development in the area or recently shuttered competitive properties. 

 

Preparing for the Appraisal “Inspection”

To ensure accuracy and to assist the appraiser in expediting the inspection, it is helpful if the property owner provides a professional survey of the subject property. 

A professional survey is far more credible than appraiser’s measurements, county records or broker estimates when it comes to determining the size of the subject site and various improvements.

It’s also helpful if the property owner can provide details of any recent renovations or repairs that have occurred. Basic details such as the date and extent of the work completed and the cost are helpful to the appraiser. Additionally, providing the appraiser with any cost estimates for work that needs to be completed, such as repairs to HVAC systems, lighting or other major building components can help paint an accurate picture of the present condition of the subject property.

 

 

As for the actual inspection process, a person familiar with the subject property should accompany the appraiser during the site visit. In this way, the appraiser can be sure that all areas of interest have been observed and questions can be answered as they arise, photos of interesting features taken, etc.

When the appraiser arrives to conduct the inspection, the exterior and interior of the subject property will be observed and photographed. The appraiser will ask questions about the property and make notes about their findings. The appraiser may also measure the site improvements, such as the main building, accessory buildings and other structures.

Typically, after the inspection is completed, the appraiser will return to the office and review the photographs and notes and follow up with any further questions or additional documentation needed.

Commercial real estate appraisers are not property inspectors or engineers. The purpose of the onsite visit is to ensure that the details relied upon related to the age and condition, quality of materials, design and layout and functionality of the property are accurate and current. Appraisers are concerned with how the subject property compares to other, similar properties within the market area, chiefly the marketability and utility of the property. 

 

Timely and Accurate Communication Is Key

The above items may not always be readily available, and the appraiser will always ask for anything specifically required for completion of the appraisal process. 

However, in the interest of time and accuracy, it is best if the property owner can obtain and have available any documents that may be needed before an appraiser is engaged.

 

 

Timing is always a factor in the appraisal process, as there are deadlines to adhere to and the possibility of changing conditions affecting the subject property. Therefore, it is important that the property owner cooperate and be thorough and timely in providing the appraiser with any information requested. Be sure to ask questions if there are things you are unsure of or don’t understand.

Ultimately, it’s the appraiser’s decisions as to how much reliance is placed on data from various sources, with the final goal being the most accurate and credible valuation that will meet the needs of the client and intended use of the appraisal.

 

Commercial Appraisal Preparation: More Information Is Better

Keep in mind that as a commercial real estate property owner, if information is important to you, then it is likely just as important to the appraiser. 

Providing the appraiser with an abundance of information is far better than not enough. The appraiser will analyze and utilize the most credible and relevant information. 

Standard Valuation Services will be with you every step of the way during the inspection process and throughout the entire appraisal process. We will walk you through the process and ensure your complete understanding of what we need and why we are asking for it. 

Contact SVS today for a free consultation on your commercial property appraisal needs.