Like home appraisals, commercial appraisals have many myths circulating the practice and industry. Dispelling the most common commercial real estate appraisal myths is a good first step to preparing to buy or sell commercial property.
Knowing the truth can save you time and money when preparing for your Arkansas property appraisal. Within this article, we have put together a few myths we have heard from clients over the years to serve as your real estate appraisal reference guide.
MYTH 1: A Simple Building Inspection Is All You Need
While getting an inspection is beneficial, it cannot nor should not take the place of a commercial appraisal. Though the two terms may seem interchangeable, an inspection differs from an appraisal in a number of ways. While a property inspection can help you identify issues within and surrounding your property and is the first step to the commercial appraisal process, an appraisal determines the value of your property. An Arkansas commercial appraisal considers items like market value, location of your commercial property, and other important value-determining factors. The home inspector looks specifically for things like mold infestation, roof damage, structural damage, plumbing issues, and electrical issues. An appraiser may notice these things too (and probably will if they are significant enough), but does so in order to consider how the problems will affect your commercial property value. Inspections can also be useful in letting you know items and features that may need to be fixed or updated in order to increase your property value. An inspection can also alert you to any problems that may cause legal issues for you as the current property owner of the real estate in question. Property owners sometimes consider inspections tedious, but inspections can be absolutely useful in many ways. Go into it with a positive mind, so you can reap all of the benefits of having the inspection of you commercial or residential real estate.
MYTH 2: A Commercial Appraisal Is an Arbitrary Formality
Some people think appraisals are an inessential means to an end. However, not only is the service necessary, it is more of an asset than you might think. Commercial appraisals are beneficial in the real estate transaction process for a variety of reasons. While appraisals can be expensive for commercial property, the assurance that you are marketing your property for its true value is worth the investment. It is much easier to secure a closing of your property and find attractive financing after obtaining an appraisal. An appraisal can also make it less stressful to decide on a listing price, or negotiate a sale price. The insight and knowledge an appraisal has to offer you is too beneficial to ignore.
MYTH 3: The Appraised Value Is What the Buyer Will Pay
While the appraised value is a good number to know, and an inspection is a part of the process, the final price the buyer will pay is up to the buyer and the seller. Some people assume that the appraised number is the end game. In reality, there are different values that are placed on properties, and those values may vary depending on many factors.
An appraised value is the number that a real estate appraiser values the property at. A property’s appraised value is obtained from the scheduled property appraisal, and is derived from factors like the size of the property, location, property upgrades, property issues, etc. This value is not a strict number on what the buyer will pay to the seller. Negotiations will ensue, and the final offer number can be higher or lower than the initial appraised value.
A buyer’s research is commonly influenced by comparable market transactions, and your selling price will likely be influenced by your commercial property appraisal. However, it is important to keep in mind that the offer will not always be exact, and will vary from buyer to buyer. The buyer could offer more than the appraised value or less than. Though a buyer may want to give you more money for your property, it can actually be frustrating for a seller when the offer exceeds the appraisal value, as the bank may not loan the buyer any more than what the appraisal value states the property is worth. When this happens, the buyer and seller must negotiate a price. If the commercial appraisal is lower than the offer, the seller or buyer will have to come up with the difference. If you think your appraisal is lower than it should be, you still have options when negotiating your property value.
What to Expect During a Commercial Property Appraisal
Knowing what to expect during appraisal can save you a ton of stress. You may be intimidated at first by the expense of commercial property appraisals and the completion timeline of 3-6 weeks. Just remember that the benefits vastly outweigh the cost.
There are a few variables that will impact the timeline and cost of your appraisal:
- The timetable of the owner and/or buyer
- The size of the property
- The type of property
- The availability of comparable valuations in the area
Although the cost and timeline of completion might seem steep, the cost of forgoing Arkansas commercial property appraisal can be much higher. The in-depth analysis included in every appraisal report will prove invaluable during the selling process. Prospective buyers may be unable to acquire loans without a property appraisal, as most loan not lend money to buyers without first knowing the true value of the property. In short, the appraisal is an investment worth putting effort into.
Contact Ferstl Valuation Services for Your Commercial Appraisal Today
For more information on how a commercial property appraisal can help you, contact our real estate professionals at Ferstl today. We look forward to helping your real estate transaction go smoothly.