What metrics do appraisers use on CRE property valuation?
How do appraisers value your CRE properties? Property valuation is an essential component that investors need to understand before having any CRE transactions. Appraisers use several factors when conducting a property valuation. These factors are your property’s characteristics, history, and data points. More importantly, the market’s condition plays off on each other in determining how it would affect your CRE valuation.
It is to your advantage as an investor to understand these metrics. Let’s look into detail at what factors appraisers use on commercial real estate property valuation.
Age is just a number, a saying that is also applicable for appraisers when they check on a property’s condition. A new property is not guaranteed to have a reasonable appraisal, while an old property that is well maintained might be valued more. Appraisers would look into commercial property details, such as the materials, condition, and any physical aspects that might impact the property’s overall condition.
Appraisers look for signs that the property is structurally compromised when doing their inspection. They would also look into signs that the property has been abused and that if it was kept maintained. Also, appraisers would inspect from roof, siding, and any other exterior elements of the property, as properties built a century ago needs a thorough inspection.
The location of the property has a significant effect on the success of commercial properties—whether they are within the proximity of schools, hospitals, and shopping centers. It also plays a critical role that the property is within high foot traffic for potential clients. Properties situated in such location is highly desirable and would have a more reasonable valuation than those in remote areas.
Commercial real estate properties that are located in the best neighborhoods will be valued better than those that are less than desirable. It is also important to assess the level of safety that the neighborhood has as it affects the level of desire for the property.
Appraisers also assess the property’s safety features. Commercial properties should have installed smoke detectors, handrails, and other safety features that would make the property and its tenants at a minimum risk. Signs of water damage would also be inspected as it might be a sign of many property issues.
An appraiser will assess the property if it’s free from pests and perform a preliminary inspection on signs of pest infestation. They would look into signs of infestation and inform the seller how they should deal with it though they might not do a full inspection.
What factors do appraisers look for is an important part of the CRE buying process. Looking for a trusted real estate agent would make the buying process much easier as they could answer your questions when the appraisal report is completed.
The results of an appraisal are final. However, a proper understanding of the result is important for the process to go smoothly and make the necessary improvement. Our team would guide you on your buying and selling process as we let you understand the factors behind your CRE valuation. Contact us today to guide you with your real estate journey.