• By Carlo L. Batts, MAI, Rittenhouse Appraisals

Understanding the commercial appraisal process (The three approaches)


Many people are unfamiliar with the commercial appraisal/valuation process. The appraisal process is defined as "a systematic procedure employed to provide the answer to a client's question about the value of real property." Appraisals can be ordered at any given time to determine the current market value and a fair sales price for a property. The typical commercial real estate appraisal should take anywhere from 30 hours to 4 weeks once the work has been agreed to, resulting in an in-depth narrative (appraisal) report ranging anywhere from 60 to 100+ pages. The purpose of the commercial real estate appraisal is to estimate the market value of the subject property in accordance with the accepted value estimating procedure. This is often done for lending purposes as it proves to a lending institution that the value of a property in question is comparable to the amount borrowed. There are three traditional approaches involved in the valuation of real property: The Cost Approach, The Income Capitalization Approach, and The Sales Comparison Approach, as described below.

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