Appraisal’s For Commercial Property

Obtaining an appraisal for a commercial property under the post 2008 changes to banking is one of the longer lead time items that a potential buyer or seller needs to consider.  Below are the steps to consider, all adding up to a 3-6 week process currently in the Pittsburgh area.

1. The Inspection Is Only The First Step Of The Process

Depending on the size and complexity of the property to be appraised, it might take less than an hour to several hours to inspect the property. Some clients perceive this as the entire process but the truth is that it is just the beginning. Appraisers research public ownership and zoning records, investigate demographic and lifestyle information, and compile comparable sales, replacement costs, and rentals. They then analyze this information as it relates to the value of the property. Finally, they write a report on their findings. The inspection is just the beginning of an appraisal process that typically takes several weeks.

2. Don’t Misrepresent the Facts

Since 2008 appraisers are less likely to take a face the owner’s claims. They will seek to verify anything that you tell them from other sources.  Appraisers are always thinking about how they will defend their opinions if they are ever brought to court, even in assignments in which litigation appears unlikely.

3. Don’t Withhold Information

You will be asked if you can provide a property tax bill, a set of drawings of the property, income statements, and other things. You might not know why an appraiser is asking you for something but it is best to provide whatever you can. Appraisers have no interest in unduly expanding their work files but they do need certain information and the more you provide, the more quickly they can complete the assignment. If you subsequently dispute the appraisers value opinions and produce additional information that wasn’t provided from the onset, you have wasted valuable time.

4. Appraisers Must Adhere to a Strict Code of Ethics

Appraisers must follow the Uniform Standards of Professional Appraisal Practice, which, among other things, requires them to provide an unbiased opinion. Failure to follow this might result in disciplinary action from the state, including revocation of an appraiser’s certification.

5. The Client Is the Party That Orders the Appraisal

If the appraisal is for financing the purchase of a building, the lender is the client.  Appraisers are obligated to maintain client confidentiality, so if you are the borrower or any other party, the appraiser cannot release the appraisal report or any other confidential information to you.  In the post 2008 environment there is often a firewall between the lending officer and the appraiser to keep the lender from unduly influencing the outcome.
6. Identify the Intended Users

Make sure the appraiser knows who you want to use the report.  If you are looking to buy a property, that might mean you intend to share the appraisal with the seller, your lender (though they will likely obtain their own appraisal) and possibly your local property tax appeal board. These people or parties will be identified in the appraisal report and are the only ones who are authorized to use the report.

 

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