Need a commercial appraisal? It is a whole different ballgame compared to the residential appraisal you got when you bought a home. Residential appraisals are typically $350-$450 and take about a week to deliver. Commercial appraisals are typically $1,800-$2,800 and take about 2-3 weeks to deliver? What’s the deal? The answer is time. The appraisal industry does not charge fees based on the value of the property, which could obviously lead to biased appraisals. Appraisers charge fees based on the time necessary to complete an assignment. In the residential arena, all of the sales and rental data needed to complete the appraisal are found in one easy source, thanks to MLS. Brokers using MLS are required to provide sale information on their properties. So all the residential data needed is at the appraiser’s fingertips and can be searched in a myriad of ways within minutes.
Commercial appraisals are very different. Texas is one of only 12 states that are “non-disclosure” states. This means that when a property sells, the sale price is not disclosed in the deed records. There is no single, all-inclusive source of commercial sale prices like MLS for commercial appraisers. Appraisers must use a multitude of resources to track down recent, comparable sales and their pertinent details. This takes time, whether it is driving the neighborhood for broker signs, sifting through on-line realtor websites, deed recording service websites, appraisal district websites or waiting for a return call from a broker who can confirm the sale price on a particular sale. Additionally, residential reports are a 10-20 page form that can be automated to some degree, and have limited narrative. Commercial appraisals are a narrative format typically between 50-150+ pages. As you can see, there is a substantial difference in time requirements for the two types of appraisals.
Hopefully this article helps illustrate the reasoning behind the considerable difference in fees for residential appraisals versus commercial appraisals. The answer is time.
John Fisher CCRA, LEED AP
Managing Director, Appraisal Services
O’Connor & Associates