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Why You May Need a Commercial Property Appraisal

February 23, 2022

A commercial property appraisal has numerous benefits to all players in the real estate industry. Property owners, sellers, renters, buyers, and even mortgage companies can all benefit from commercial property appraisals. Below are some reasons to commission commercial property appraisals.

Property Purchase or Sale

An appraisal can help you set the appropriate listing price if you want to sell your property. For example, you can:

Set the listing price slightly above the appraisal value if you don't want to sell the property below its market value
Set the listing price slightly below the appraisal value if you want to sell the property fast and you are in a buyer's market

As a buyer, you can use appraisals to do the following:

Avoid overpaying for properties
Identify attractively priced properties
Determine whether to proceed with an investment, depending on your investment purposes

Whether you are a buyer or seller, your agent will use the appraisal report to advise you on the best way to proceed.

Rental Prices Determination

Commercial leases tend to be more complex and expensive than residential leases. Due diligence will help you avoid costly mistakes with commercial leases. A professional appraisal should be part of the due diligence.

For example, the appraisal report will help you determine:

If the rent demand is fair
If your business can thrive with the rental price
What lease terms to negotiate

For example, you can ask the property owner to pay for some improvements before signing the lease.

Mortgage Application

A prospective lender will want an appraisal report if you want to apply for a mortgage. The report is necessary for both fresh mortgage applications and refinancing.

When a lender awards your mortgage, the property becomes the loan's security. Thus, the lender must confirm that the property is worth the loan amount. The appraisal report provides the confirmation. For example, a mortgage company cannot loan you a million dollars if the property is only worth half the amount.

Tax Assessments

Several tax issues call for a commercial property appraisal. Below are some of them.

Tax Assessment

The government uses property value to determine property tax. An assessment can help you prove the true value of your property so that you can pay the correct tax.

Tax Assessment Appeal

The government may err and overinflate its tax demands on your property. You can use an appraisal to get the property's real value and lodge a successful tax appeal in such a case.

Gift Taxes

Personal gifts above a certain amount attract taxes. For example, the tax may be applicable if a parent transfers real estate property to their child as a wedding gift.

Estate Taxes

Estate taxes apply when someone dies and leaves their estate to beneficiaries. For example, a child who inherits a rental property from their parent might pay estate taxes on the property.

Property Damages Assessments

Damages reduce a property's value. For example, an office building's value can decrease after severe flooding or storm damage. You can commission the building's appraisal to determine how the damage has affected its value in such a case. The damage assessment can help you, for example, process accurate insurance claims.

Property Division During Divorce

Many divorce cases involve the division of property, including real estate property. However, you cannot physically divide real estate property. One option is to appraise the property and add its value to the value of the marital property. That way, one person can use cash or other assets to buy out the other's share of the property.

East Coast Appraisal Service has been active in the real estate industry for over 30 years. We can help you appraise various real estate properties, including residential and commercial ones. Contact us for a commercial property appraisal and benefit from our professional services.

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