While property appraisal is not a requirement for the purchase or sale of a property, it is an important part of the overallcommercial real estateprocess. Property appraisals provide valuable information the buyer can use as they make their final decision such as an estimate of how much the property would sell for on the open market. Appraisals can also give you an idea of how the property fits your portfolio. When you have a clear understanding of the value of a property, you and your local commercial broker will have a better idea of what to offer the seller. Another great reason to have your commercial property appraised is it helpful when you want to add value to your property.
The three main approaches for commercial real estate appraisals are the sales comparison approach, cost approach, and income approach. The sales comparison approach looks at what similar properties have sold for in the marketplace. A limitation of this approach is that finding comparative prices can be difficult, so you’ll have to look outside the market area, which can introduce factors that may alter the appraisal.
The cost approach is used when calculating how much it would cost to build the property from the ground up. You look at the value of the land, construction materials, and labor costs. This approach operates under the assumption that the property’s value equals the cost to build the property from new, minus accrued depreciation.
The income approach considers any potential earnings the property can generate in the future and determines value (cap rate) based on the net income. This approach requires a commercial real estate appraiser who has in-depth knowledge of market trends and the cash flow trends of the property.
Lower interest rates mean this may be a great time to sell your commercial property, allowing buyers to borrow more, however, before you list it may be a good idea to get an appraisal. Economic depressions and uncertainty can alter appraisal activity. In a recent survey conducted by realquantum, almost half of respondents felt that commercial real estate property values have dropped in 2020 but it is important to note that local markets can be different than regional or national economic conditions or projections.
Are you ready to buy or sell commercial property in Brevard County, FL? Contact the team at Ullian Realty. We’ll review your appraisal with you and ensure you have a clear understanding of fair market value. Give us a call to learn more today.
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