commercial appraisal

Commercial Appraisal

What is a Commercial Appraisal?

A commercial appraisal is a document used to determine and support the commercial value of an asset, whether personal or real estate. Its main objective is to provide accurate information on the value of the asset in question, taking into account its final use. This may vary depending on the situation, such as for a negotiation, purchase, sale, rental, transfer, insurance policy, mortgage, replacement, among others. In summary, a commercial appraisal is a fundamental tool to guarantee fair and safe transactions in the real estate market and in other sectors where it is required to know the value of an asset.

What is a commercial appraisal used for?

A business appraisal is used in a variety of situations and contexts, including:

Insurance policies: To determine the insurable value of an asset and establish the insurance premium.
Investments: To evaluate the viability and value of an asset as part of an investment strategy.
Buy and sell: To establish a fair price in transactions for the purchase or sale of goods.
Transfer: In property transfer processes, such as inheritances or donations.
Lease: To establish the fair rent of a property in lease contracts.
Credit guarantee: As support to grant loans, mortgages or other forms of financing.
Re-statement of financial statements: To update the value of assets in a company's financial statements.
Financing: As part of the requirements to obtain financing from banks or other institutions.
Remodeling and development: To evaluate the value of a remodeling or development project of a property.
Study feasibility: To determine the viability of projects for greater and better use of land.
Administration: To carry out efficient management of the assets of a company or institution.

In many procedures, a certified commercial appraisal is required, supported by an expert appraisal expert on the subject, who has specific knowledge to carry out the appropriate procedure according to the type of appraisal and the particular context of the situation.

What is needed to request a commercial property appraisal?

For an appraisal it is necessary to have various documents, which are essential to obtain specific information and data and thus be able to carry out the study, among them are:

Appraisal request
Housing termination document
Housing deeds
Payment of services and that they are up to date
Current property payment
Property plans

How Can a Commercial Appraisal Be Calculated?

To calculate a commercial appraisal, three types of approaches can be applied:

Physical or direct approach: This approach determines the value of the asset by considering the replacement cost of the materials and labor necessary to rebuild or replace it. It helps to know the construction materials and facilities used and their current value.
Income capitalization approach: This method is based on comparing the property with other similar properties in the same area that are for rent. The value of future income that the asset could generate is estimated, which helps determine its current value.
Comparative market approach: This approach is based on the market supply of similar properties in the same area or in similar areas. The property is compared with other properties that have similar characteristics in terms of location, size, state of conservation, among others, to determine its value.

Each of these approaches provides a different perspective on the value of the property and can be used in a complementary way to obtain a more accurate estimate of the commercial valuation. It is important to have the advice of an expert appraiser on the subject to carry out the calculation properly and accurately.

What Does The Appraiser Do?

The appraiser is the professional responsible for carrying out the comprehensive study of the asset to be valued. Among the tasks performed are the collection, analysis and completion of the forms necessary to compile relevant information. During this process, the appraiser examines a number of key elements, including:

Property maintenance: Evaluates the degree of maintenance and care that the property has received over time.
Current state of the property: Analyzes the physical and structural conditions in which the asset is located at the time of valuation.
Environment and location: Considers factors such as the conditions of the surrounding streets, the presence of public services, proximity to schools, shopping centers, hospitals, among others.
Expansion potential: Evaluates the possibility of expanding the property in the future, if applicable.
Age and quality of construction: Takes into account the age of the construction and the quality of the materials used in its construction.
Services and amenities: Examine the services that the property has, such as water, electricity, gas, among others, as well as other available amenities.
Accessibility and transportation: Consider the accessibility of the place and the means of transportation available in the area.

By collecting and analyzing this detailed information, the appraiser can accurately determine the commercial value of the property, providing a reasoned and objective evaluation.