When it comes to getting an appraisal for your property, there are actually more differences than you would think between residential and commercial.
The main differences include:
- Length of the appraisal report
- The appraisal cost
- The time it takes to complete the appraisal
To start, it is helpful to understand the meaning behind ‘residential’ and ‘commercial’ properties. ‘Residential’ means that people will live on the property. ‘Commercial’ means that the property will be used for a business purpose; that people will not be living on the property. ‘Commercial’ property also means that the property will be used to make a profit in some way, which is given to the property owner. Additionally, the property itself is typically less costly when it is residential.
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Time Spent on an Appraisal
The beginning of the appraisal process often starts with a walk-through of the property. Although this might not take more than a few hours, the process doesn’t stop there. The appraiser has to take into account a huge variety of factors. There are more factors to consider when doing an appraisal for a commercial property. The reason that a commercial appraisal is more detail-oriented is that there is often more to consider in terms of size, technicalities, what property would be used for, and more. Naturally, because there is so much more time spent on commercial appraisal reports, and there are more factors to consider, the appraisal document is much longer for commercial properties.
The Appraisal Cost
The largest difference between residential and commercial is the cost of the appraisal. As stated before, the appraisal process for a commercial property is much more time consuming because of how detail-oriented the appraiser has to be. The residential home inspector that you would hire prior to purchasing a residential property is not the same person who would do an appraisal. An appraiser charges more than a home inspector because they’re not only inspecting the property, they are also reporting on the value of all its attributes.
“In the residential sandbox, the interest rate was very predictable, there was no lender fee, the appraisal costs were low and the legal fees were standard. All of those change when you buy a multi-family/commercial property. The rates could be higher; the bank charges a fee – as does your broker, the appraisal costs start at $1,200 and can go much higher. The legal and accounting fees will be higher.”
–Canadian Real Estate Magazine
If you need an appraisal and you’re looking for someone efficient, and detail-oriented, contact us!