Commercial Real Estate Appraisal
- The cost approach is considered most applicable for commercial real estate appraisals for relatively new properties and special-use properties. Commercial real estate appraisers are less likely to use the cost approach for older properties due to the difficulty of precisely calculating the amount of depreciation.
- The income approach is most applicable for investment or income properties. Appraisers gather data regarding the actual income and expenses for the subject property, rental comparables, expense comparables, industry expense data, market occupancy, and rental market trends for analysis. The commercial real estate appraiser then estimates gross potential income, other income, effective gross income, operating expenses, and net operating income to arrive at a value conclusion.
- Commercial real estate appraisers also utilize the sales comparison approach to determine market value. The sales comparison approach is often utilized on owner-occupied properties. After obtaining data regarding similar properties that recently sold, the appraiser applies appropriate adjustments to the comparable sales to form an opinion of market value for the subject property.
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