Normally, a commercial appraisal should take three to four weeks to produce. But often this process can take much longer. Several delays can hinder making a commercial appraisal process faster. These derail a qualified appraiser trying to collect all the information and documentation necessary to determine an accurate value on the property.
Common Problems in Commercial Appraisals
Before a commercial property can be bought and sold, a commercial appraisal must be done to determine the market value. For any real estate deals more than $250,000, Federal Deposit Insurance Corporation, or FDIC, regulations require a financial institution, like a bank, to hire a qualified appraiser.
At times this relationship can get bogged down at the very start. We review the many ways the commercial appraisal process can be the victim of unnecessary delays. We provide advice on how to establish a truly accurate appraisal in a timely manner.
Wrong Contact Person
To get the appraisal going, the financial institution must do two things. First, it should provide an accurate description of the property and give the appraiser the actual scope of work. Second, the bank has the responsibility for offering the appraiser the proper contact person. The appraiser usually gathers all the information for the appraisal from this source.
The first delay often happens at this point. All too often, the bank provides the buyers name as the contact person, instead of the broker or seller. The buyer simply lacks critical information necessary to effectively answer questions from the appraiser about the property, such as its history.
Additionally, they typically cannot authorize access to the property, so the appraiser can conduct an inspection. This also stalls the process.
Sharing Comparable Property Data
In addition, appraisers must find and research similar properties to help support their conclusion on the value. Banks closely scrutinize this aspect of the appraisal. The appraiser often completes this step by scrutinizing public sale records and completed deals within a certain time frame. Sometimes people feel reluctant to share what they believe to be private financial information and refuse to return calls about properties bought or sold. They should know that qualified appraisers always follow the Appraisal Institute’s International Standards of Practice for Inspecting Commercial Properties. This has strict ethical and confidentiality requirements. Information gathered always gets held in the strictest confidence.
Other resources appraisers utilize include information about zoning, regional, city and neighborhood data. They also take into account the socioeconomic, governmental or environmental conditions that can raise or reduce the value of a property.
Delays in “As Complete” Opinions
Banks usually request “as complete” opinions when renovations or new construction are planned on the commercial property. Significant delays can occur with changes or updates to final plans, specifications, project costs, time tables for completion and other project issues. This inevitably knocks an appraiser off track on a promised appraisal delivery date.
Making the Commercial Appraisal Process Faster
The investor or buyer can greatly assist in making the commercial appraisal process go much smoother and faster by doing three things: 1) Provide all the documents the appraiser requests, 2) Respond promptly to any questions and 3) Be prepared to offer clarifications with accurate information.
Here are the typical relevant documents most appraisers ask buyers to provide:
- Site plans
- Building drawings
- 3 years of income statements
- 3 years of operating expenses
- Leases
- Rent rolls
- Multiple years of tax information
- Excel outputs of all related costs for any work to be performed
- Intended use of asset
- Results of any environmental assessments
- Pro forma expectations
Keeping documents handy, including extra copies of critical ones, often makes a commercial appraisal process faster.
Paramount Property Analysts Offers On Time and Accurate Commercial Appraisals
Our qualified appraisers in our six locations across Texas can complete the commercial appraisal process faster and more accurately for you. We strive to provide high-quality and reliable real estate services to our clients across Texas and the United States. Get in touch with us for any challenges you need solved.
