You’ve decided to order a commercial appraisal report.
That’s great! Because a commercial appraisal report is an indispensable tool when it comes to understanding the value of your commercial property.
You’re ready to select the best commercial real estate appraiser to complete the assignment and get the ball rolling.
Only one question remains: How much does a commercial real estate appraisal cost?
Here are some insights into how the cost of a commercial real estate appraisal is determined.
What Type of Appraisal Report is Ordered?
Commercial appraisals generally come in one or the other of the below options (based on the type of commercial appraisal report) and the option selected can have an impact on the price.
A narrative Appraisal Report is the most common format for a commercial real estate appraisal. This format requires that the appraiser summarize the many conclusions, assumptions, and facts related to the commercial property and the valuation process.
It comprises the most in-depth reporting and will provide the Client and Intended User with adequate supporting information to easily understand how the appraiser arrived at the conclusion.
A Restricted Appraisal can be far briefer and generally assumes that the Intended User has adequate knowledge of the subject property, market and appraisal processes to understand the conclusion without the level of reporting detail found in the Appraisal Report format.
Keep in mind that the appraisal process is the same for any type of appraisal report. As discussed in a previous blog, the process relates to the gathering and dissemination of a vast amount of physical, demographic, and market data related to the subject property.
However, since the reporting requirements for a Restricted Appraisal tend to be less stringent, the fee, or cost, can often be less than an Appraisal Report.
Which Valuation Scenarios are Requested?
The valuation scenario includes the type of value requested, such as the Fee Simple Market Value or Market Value of the Leased Fee ownership interest.
It can also include consideration of other factors affecting value, such as whether the property has any specific physical characteristics that might warrant additional analysis or special consideration.
Some examples include:
- A retail building with a lease billboard attached
- Buildings on very large parcels of land when the vacant site area may have independent utility (which impacts the value of the real estate as a whole)
- If a building is fully leased to a single-tenant, but the client wants to know the value of the property with the tenant in place, but also if the tenant were to vacate unexpectedly
- A commercial property with a planned major renovation or addition; the client may wish to know the prospective value of the property upon completion of the proposed construction
Factors That Impact Commercial Appraisal Costs
Scope of Work
The scope of work is another factor that affects the commercial appraisal process. Every scope of work brings with it a specific requirement for research, analysis and reporting that can affect the appraisal fee.
For example, think of a large truck stop. A truck stop may sell fuel, feature certified scales and repair services, have a convenience store and one or more restaurants, and offer showers and other services. Some truck stops lease space to tenants who provide even more services, such as barbers and clinics.
The scope of the commercial appraisal process for the truck stop example might include an examination of the market for service stations, retail centers, restaurants and auto repair garages. As one can imagine, a broader or more involved scope can certainly have an impact on the appraisal fee.
When is the Completed Appraisal Needed?
Timing is everything and commercial appraisals take time. The less time an appraiser has to complete the appraisal process and deliver a completed report, the greater the impact on the fee will be.
Other Factors That Impact Commercial Appraisal Cost
There are other factors that may affect the cost of a commercial appraisal report.
Some things typically considered for pricing commercial appraisal costs:
- The location of the subject property: properties in remote locations or areas with little market activity might require greater effort in obtaining relevant market data or can even be an additional expense to the appraiser if they have to purchase data from a reliable third party.
- If travel to the subject property is necessary: properties located in distant locales or are out of state may require paid travel which needs to be factored into the fee.
- If specific data is necessary: some commercial properties, such as hotels, for example, may require that the appraiser purchase specific market data related to the subject property. There are various custom market reports available from credible firms such as STR, Inc. (Smith Travel Research) who compile market data of interest to appraisers, for a fee.
- Ordering one or more commercial appraisal reports: if several commercial appraisals are being ordered at the same time and the necessary research and analysis is similar for each, there is a potential for savings.
So, How Much Does A Commercial Appraisal Cost?
As you can imagine, every commercial property is different, and therefore every commercial appraisal is going to be different as well.
The Scope of Work of any assignment will be partially dictated by the Intended Use of the appraisal, the Client’s specific requirements, government requirements and regulations, the size, use, and location of the subject property, and other factors.
Some appraisal firms will offer set pricing and others will provide a quote including the fee for the appraisal and the delivery date expectations.
The price can be affected by many factors, so it’s best to reach out to a qualified appraisal firm and inquire.
If you’d like to reach out to us, we will be pleased to answer all of your questions and provide you with a quote.
We look forward to hearing from you soon!
Want to learn more about commercial appraisals?
Get The 2021 Property Owner’s Appraisal Guide here for free!