Real estate appraisals – whether they are for residences or businesses – are a necessary part of the buying/selling process. They give buyers, sellers, and lenders a detailed view of the value of the property, which is based upon numerous factors, including the condition of the property itself and the market rate. Here’s what you need to know about home and commercial property appraisals.
Getting a Home Appraised
Home appraisals are a requirement for mortgage lenders, since they don’t want to lend a home buyer more money than the property is worth. They are conducted by licensed and certified real estate appraisal professionals, and while each individual appraiser may perform an appraisal slightly differently, all appraisals must adhere to standards set by the Uniform Standards of Professional Appraisal (USPAP). The appraiser’s report must be entirely unbiased, and not appear to deliberately favor any party.
Mortgage lenders will select the real estate appraiser, who must be independent and not under the influence of any party. The appraiser physically views and inspects the property (which may take approximately one hour, depending upon its size), and also analyzes data relating to recent sales of homes in the same neighborhood of comparable size with similar features. The property will be measured (the structure/s and the lot), and the structure and internal/external features will be assessed, including:
- Condition of plumbing
- Condition of the roof
- Condition of electrical wiring
- Condition of flooring
- Condition of windows
- Existence of water damage
- Existence of mold
- Existence of mildew
- Existence of termite damage
- Condition of landscaping
The final valuation report will contain an assessment of the property, including any existing building code violations, structural quality, the condition of permanent interior features (including lighting, faucets, etc.), and renovation details. The report will also include details about neighborhood features and the market price of other comparable local properties.
Getting a Commercial Property Appraised
A commercial property appraisal is required for commercial property purchase, sale, and leasing. A commercial real estate appraiser must be specifically licensed to perform commercial appraisals. While there is some overlap between home and commercial appraisals, the main difference between the two is the factoring of the commercial property’s tenant quality, should any tenants be in residence. If the building has tenants, those tenants must have filed signed leases at the market rate. If those tenants are leasing below the market rate, or are leasing on a month-to-month basis, the value of the property may be significantly compromised, since the possibility of vacancies is considered a major risk.
Commercial property appraisals also take the surrounding region’s economic prospects into account. Commercial property in a neighborhood that is experiencing economic growth will be more highly valued than property located in a neighborhood in decline. Considerations like accessible transportation routes, new developments, and best use of property (if the local market is amenable to the intended business venture) will also be key factors.
The appraisal will begin with physical property inspection, and will require analysis of zoning and sales records of comparable properties. In order to facilitate the timely and accurate appraisal of a commercial property, it is crucial to produce the following documents:
- Expense statements
- Building surveys
- Building/floor plans
- Maintenance costs
- Income and expense statements
- Property tax bills
- Leases/rent rolls
If an appraisal is performed without the appropriate information, a dispute may be lodged, but submitting all necessary documents during the initial stages is necessary in order to ensure the speediest possible appraisal. A full appraisal of a commercial property may take weeks, depending upon its size. A large development – such as a shopping plaza – may require days of property analysis.
Whether you’re buying or selling real estate, NovaStar Appraisals offers access to accurate and comprehensive appraisal services. As a leading real estate appraisals service hub, NovaStar provides the advice, tips, and resources that help clients make advantageous financial decisions.