1) The Report Should Only Take a Few Days to Complete – Wrong. If you want to pay a substantial fee to secure expedited delivery anything is possible but generally speaking a commercial appraisal takes many days to complete, anywhere from 30 hours to several weeks depending on the scope of work and complexity of the assignment. Also, most good commercial appraisers are always in high demand so even if the assignment you ordered only takes the appraiser a week to complete he/she may have to complete a number of assignments already in the queue.
2) The Appraiser can just Punch a Few Buttons on the Computer to Obtain Market Data – Wrong. Although top notch commercial appraisal firms are automated, paperless and highly efficient, professional commercial appraisers still need to undertake significant investigative due diligence in order to ensure accurate and defensible value conclusions. Research needs to be thorough, all data needs to be verified with market participants and the properties themselves need to be personally viewed. Then after the data is properly positions there is still significant analysis that needs to be completed.
3) Commercial Appraisals are Basically Similar to Residential Appraisals. – Wrong. Other than some basic valuation principles which are common to each type of appraisal, nothing could be further from the truth. Residential appraisals are typically form documents with very little in depth research. The analysis is usually limited a basic direct sales comparison analysis. In most commercial real estate appraisals there are multiple valuation methods (Income Approach, Sales Approach and Cost Approach). While the depth of the analysis is often client driven commercial appraisal reports feature detailed site and building improvements descriptions, many exhibits, in depth zoning and land use data, thorough regional and market area descriptions, and often times extensive market analysis (supply, demand, vacancy, absorption and etc.), detailed published surveys, broker interviews, detailed highest & best use as vacant and improved, detailed valuation analysis, rent and sale comparable data, operating expense comparisons, cap rate and discount rate support, and more. Commercial appraisals also often include complex financial modelling.
4) One Type of Commercial Appraisal Fits All – Wrong. The type of commercial appraisal can vary depending on the needs of the client and intended use of the appraisal. The scope of the appraisal should be determined prior to ordering the appraisal. Commercial appraisals can vary from 10 to 20 pages to over 200 pages depending on the complexity and depth of the assignment.
5) You Should be Able to Get a Good Commercial Appraisal for Less Than $2,500 – Wrong. While fees tend to be lower in remote areas or for small less complex properties, legitimate professional commercial appraisal fees by top notch firms typically cost anywhere from $2,500 to $10,000 and up. The commercial appraisal costs/fees vary primarily by the complexity of the assignment, availability of data, required turn-around time and scope of work. Remember, quality is more important than cost when choosing a commercial appraiser and like anything in life; you get what you pay for.