Keys For Accurate Appraisal of Commercial Real Estate Noah George
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As a matter of fact, the commercial real estate appraisal is a combination of science and art. The expert and experienced appraisers capture and analyze the relevant data before going for informed decisions regarding the real estate valuation. Moreover, the appraisers have developed and follow a series of analytical methods such as cost approach, the sales comparison technique and the income capitalization approach.Â
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Most of the essential approaches rely on the characteristics of the concerned property. Thus, each technique has value as per the circumstances and the type real estate property which is involved.
The Cost Approach: ď ˝
The cost approach is more applicable for valuation of the new commercial property and the special-use property. However, this approach is rarely used by the property appraisers to carry out appraisal of the older properties since it is difficult to properly calculate the total sum of the depreciation. The primary hypothesis used by this approach is that the value of property is same as the expenses required to construct the specific property or the cost of the replacement.
Sales comparison Approach: ď ˝
Most of the people are familiar with this technique as it is an approved technique for carrying out appraisal of any commercial property. Typically this technique comprises choosing the properties with identical characteristics and features existing in the same market area and considers only those properties that are recently sold out. After figuring out those properties, they are compared with the commercial real estate in question.
Income Capitalization Approach: ď ˝
The income capitalization approach is regarded most applicable one for the investment in the real estate property. The efficient appraisers work to gather data with respect to the actual income and the various expenses for the concerned property, the expense comparables, rental market progressions, rental comparables, the market occupancy and the industry expense data.
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The reputed professional appraisers like New York property appraiser then tends to estimate the effective gross income, gross potential income and net operating income to find out the accurate market value of the subject property. After taking into account each of the three techniques to do the valuation of the concerned property and prepare the relevant analysis, the appraiser co-ordinates the indications of the value to get a final value.