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If you are an investor considering buying a commercial real estate, you must know as much about a piece of property as you possibly can. One essential piece of information you must know is the value of the property. You can get this information by having an appraisal conducted on the property. A commercial real estate appraisal is typically performed by a trained expert who will look at several factors to determine how much a commercial property is worth.
Investors use appraisals to determine if the property is worth the purchase price. An appraisal is also necessary for insurance purposes as well as for property taxes. Typically, a commercial property insurer will want the value of the property confirmed before issuing a policy. Banks issuing loans will also generally want to know how much the property is worth.
Benefits
Appraisals work best in situations where an investor is purchasing a property for potential resale or rental income. Knowing the value of the property can help an investor determine how much to invest in renovations if he or she is planning to flip the property. If he or she wants to use it for rental income, knowing the property’s worth can make determining rental rates easier.
Appraisals Save Money
The person selling the commercial property is most likely trying to get as much money as possible for it. This may involve asking more than the property’s worth. Knowing the true value of a piece of real estate can prevent you from overpaying on the property itself as well as on the interest you will be charged on the bank loan. Additionally, your property taxes are based on the value of the property. Therefore, it helps to ensure this number is accurate.
Get the True Resale Value
If you are the one reselling the property, having an appraisal ensures that you get what the property is worth. According to Bloomberg, properties increased 6.3% in May of 2011. Property values change over time. If there have been significant developments in the community since you purchased the property, it may be worth much more than what you have paid. Having this information puts you in a better negotiating position.
Identify Areas That Require Maintenance
An appraiser does a full inspection of the property as part of the process of determining its worth. He or she can identify areas of the building that require attention. As a buyer, you may need to invest money into making these repairs once you own the property. However, you can use this information as a bargaining chip for reducing the overall price.
Insurance Purposes
Almost all insurance companies will want to know the value of the property they are insuring. Additionally, having your commercial property appraised can help settle insurance claims, should something happens to the building.
Pitfalls
Cost
Appraisals add an additional cost to the purchase of the property. This needs to be factored in as part of the total price of the investment.
Possibility of Low Valuation
Although the real estate market tends to be stable, there are times when values fluctuate. The appraiser looks at the values of surrounding buildings as well as the community as a whole when considering how much to appraise for your commercial property. If there are factors that negatively affect property values in the area, this can result in low valuation. This, in turn, can hurt your chances of getting a good price if you are selling.
Appraiser Mistakes
Appraisers sometimes make mistakes that can lead to financial consequences for you. This includes forgetting to include some parts of a building in the total square footage as well as overestimating the value of surrounding properties. These types of mistakes can make it more difficult to get a loan for the full amount you need to purchase or cause you to overpay for the property.
Pricing
The cost of a commercial real estate appraisal will vary from region to region and between companies. Some appraisers will also charge according to how much work is done. For example, they may charge one price for a basic report but charge another for a report that includes pictures, zoning research, and other services.
An appraisal for a commercial property can range from $500 to over $3,500 depending on the type of property appraised and the report ordered. Since an appraiser can end up saving you money by appraising the property at the right price, the cost is oftentimes justified.
Investing in an appraisal for your commercial real estate property can save you time and money. If you are a buyer looking for a piece of property to invest in, you can put yourself in a better position to negotiate if you know the true value of a piece of property. Additionally, it will also make it easier to price rental space as well as help ensure you are not paying more taxes than you actually owe.
Have you considered selling your home? Do you know the true value of your home? As the economy seems to be bouncing back at a slow pace, many people are now wondering if this is the time to sell their home. There are many factors that will come into play when we are talking about the specific value of your home and the best way to start would be with a real estate appraisal. These are done by licensed appraisers and will evaluate not only the current value of the property, but they may also be able to give you an idea of the future value. The future value of the home would be based upon some home improvements that can be made to increase the value of your home .
Having a real estate appraisal done is not just for someone that wishes to sell their home or business. It can simply be done for anyone to see how the market has affected them or just to simply know what the current value of their property may be. Knowledge is indeed power. Before you hire someone to come out and appraise your property, be sure to be diligent and do your research. One handy tool can be found at Business.com. Visit the links on the left to learn more and to visit the information provided by Business.com.
