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7 Things to Know About Commercial Real Estate Appraisal

A commercial real estate appraisal is difficult to analyze from knowing what to ask for and what to provide for the appraiser. A property tax consultant offers, value of real property, advice to their clients on major assessments, identify opportunity for appeal and assist in managing their property tax towards achieving tax reduction.

Here’s what you need to know about Commercial real estate appraisal. 

  1. Inspection is just a part of the Appraisal Process
  2. Disclose the facts and right information
  3. Appraiser’s Strict Code of Ethics
  4. Appraiser withholds confidential information
  5. Three types of reports
  6. Establish the exact date of valuation
  7. Discover the property interest to be appraised

Inspection is just a part of the Appraisal Process

Inspection is just a beginning in the process of an appraisal, it might take less than an hour or more than that depending on the size and complexity of the property. The Appraiser estimates the value of the property, zoning records, investigate demographic analytically, and compile comparable sales, replacement costs and rentals. And finally they produce a report based on their inspection.

Disclose the facts and right information

Appraisers will verify information that you tell them from other sources. You will be asked to provide a property tax bill, a set of drawing of the property, your income statements and other things. Appraisers are always thinking about how they will defend their opinions if they are ever brought to court, even in assignments in which litigation appears unlikely. Appraisers need certain information to complete the assignment, if you misrepresent anything, the appraiser will discount the credibility of anything else that you say.

Appraiser’s Strict Code of Ethics

Appraisers must follow the Uniform Standards of Professional Appraisal Practice to provide an unbiased opinion. If an appraiser fails to follow the Appraisal Practice, it might result in disciplinary action from the state, including revocation his certification. So if an appraiser refuses to do something that you ask for, it is probably because of the obligation to adhere to these ethics.

Appraiser withholds confidential information

Appraisers are obligated to maintain client’s appraisal report closely and confidentially. The appraisers cannot release the report information to the borrower or any other third party. If you order an appraisal as part of a property tax appeal and are afraid that the appraised value might be higher than the assessed value, you can rest assured that the appraiser won’t release the results to the property tax board without your permission.

Three types of reports

A “restricted use report” is the shortest and the most inexpensivetype, but can only be used by the client. A “summary report” summarizes the data and analysis and can be used by any intended user. Last but not the least, a “self-contained report” contains all of the details of the data and analysis, but is rarely requested. Based on your requirement appraiser will guide you as to what type of report you will need.

Establish the exact date of valuation

The amount of work involved in reaching conclusions does not depend on the type of appraisal. With a restricted use or summary appraisal, the property tax consultant will compile a large amount of information that are maintained in a work file but are not included in the report. It is important that you establish the correct date of valuation for your needs.

Discover the property interest to be appraised

It is important to tell the appraiser what your interest in the property is. If you want to know what a property is worth to a landlord when occupied by a particular tenant or tenants, you want a “leased fee interest.” It is important that you establish the correct date of valuation for your needs.

In short, the appraiser will be in a situation to help in reducing your property taxes, unless and until you make them clear what your real need is.

Blog Author

Patrick O’Connor, MAI, Owner and President
Patrick O’Connor has been active in reducing property taxes, providing expert witness testimony and appraising commercial real estate property since 1983. Pat is active in publishing analyses and data with respect to the real estate market, while being a highly regarded media spokesperson for the real estate community. He holds a MAI, the highest achievable designation from the Appraisal Institute, and is a licensed senior property tax consultant. Pat earned a Master of Business Administration from Harvard University. In 2001, he authored the first definitive consumer guide to Texas property taxes, Cut Your Texas Property Taxes.

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