Within every property appraisal, there’s a healthy dose of nuance and understanding. Three main approaches help produce a complete picture, but on their own, each has its limitations. Every approach can also take varying amounts of time to complete so answering “How long does it take to get a commercial appraisal?” isn’t always a simple number.
Typically, a commercial property appraisal can take up to 2-3 weeks, but that depends on many different factors. As mentioned previously, each approach to appraising a property can take varying amounts of time to complete and are often paired with other approaches to produce a better picture of a property’s value. In addition, the more complex a property is, the more time it will take to appraise as well.
Here is some additional information about the time it takes to complete an appraisal:
1. A residential appraisal should be completed within 1-2 days after an inspection.
2. A commercial appraisal should be completed within 2-4 weeks after an inspection depending on the appraiser’s workload. Timeline is a critical component and the number of reports to an appraiser is working on.
Below, we discuss the three main approaches, and how they work.
How Long Does It Take to Get a Commercial Appraisal Using the Sales Comparison Method?
The short answer? It depends. Because appraisal methods work best in conjunction with each other the sales comparison method is also lumped into the general time it takes (i.e. around 48 hours).
The sales-comparison method is the main method used in residential real estate, and is often used in commercial real estate as well. In this method, appraisers will first look for recently sold properties with similar characteristics in the same region as the property being appraised. Once they’ve found some they will then compare the properties to the one being appraised to get an estimate of value. The better the selection of comparable properties the more finely tuned the resulting appraisal will be.
In their comparison calculation, they will deduct and increase the value for comparative deficiencies or advantages accordingly.
How the Income Capitalization Method Works for Specific Properties
The income capitalization method is commonly used, but only for specific properties. You’ll quickly see why.
The method takes the approach of using current data to estimate future data. Here, “value” is defined as the present worth of all future benefits to be extracted from a property.
Thus, the property types this works best with include offices and shopping centres like malls. It also works well with properties that have harvestable natural resources like trees. This is because this method relies on predicting the future more heavily than others, and its effectiveness is better complemented by other approaches.
Using the Cost Method for Appraising Commercial Property
This is the least-often used approach, but its data collected through it is nonetheless still valuable. In this method, appraisers assume that the value of a property is equal to the replacement cost of the structures on the property (minus depreciation) plus the market value of the land itself.
The cost method relies on a detailed understanding of the construction process but only produces an accurate report with respect to construction alone. It doesn’t take into account how a property built in a poor location factors into the value of a place.
Therefore, this method works best in conjunction with the sales comparison method.
Commercial real estate appraisal isn’t (and shouldn’t be) limited to single methods. In fact, most appraisals use a mixture of all the aforementioned approaches to produce a thorough and detailed report. Each method gives a commercial real estate appraiser another tool in their belt to produce the most accurate appraisal possible.