If you are thinking about purchasing or selling commercial property, this information about commercial real estate should be very profitable. A commercial appraisal is a land valuation method that helps you assess the value of your property. Licensed appraisers administer these reports, and banks will ask for them before getting approved for a commercial property loan.
Commercial appraisers use three methods in commercial appraisal services. The first method is the comparative approach, where they look at similar properties to yours sold in the last six to 12 months.
They determine the potential value of your property using this system mainly for business owners who want to buy an existing commercial property.
The income approach is the second method where they essentially look at the property's income versus the cap rate of trading rates of properties. Appraisers take the net income and divide it by the cap rate to get the potential valuation of income-producing properties.
For newer developments, they use the cost approach. They take into consideration the costs of developing the property. This method is used because no other properties around can be compared to the newer property. Commercial appraisals take a lot longer and are more expensive than residential appraisals.