What is a commercial real estate appraisal?

A commercial real estate appraisal is a comprehensive evaluation process conducted by a professional appraiser (AACI, P.App.) to determine the value of a property. This process involves examining various factors, including the property's location, condition, size, and the income it generates, as well as comparing it to similar properties in the area. The appraisal serves multiple purposes, such as during property sales, for loan collateral, taxation, and investment analysis, providing an objective valuation that supports financial decisions.

What qualifications do your appraisers have?

Our commercial appraisers hold or are working towards the AACI, P.App. (Accredited Appraiser Canadian Institute, Professional Appraiser) designation, the primary credential recognized in the field. This prestigious designation is awarded by the Appraisal Institute of Canada (AIC) and signifies that the appraiser has met stringent requirements in education, experience, and ethical practice. Achieving the AACI designation involves completing a rigorous educational program, accumulating practical experience under supervision, and successfully passing a professional examination. Appraisers are also required to adhere to the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) and engage in continuous professional development to maintain their status.

How long does a commercial appraisal take?

The timeline for a commercial appraisal can vary widely, often taking anywhere from a week to several weeks, depending on the property's complexity, data availability, and the appraisal's specific purpose. Factors such as the appraiser's workload and the promptness in providing necessary information also play a significant role in determining the overall duration.

How can I prepare for an appraisal?

To prepare for a commercial appraisal here are several steps to ensure the process is efficient and the valuation is accurate:

• Gather Property Documentation: Compile all relevant documents related to the property, such as title deeds, property plans, lease agreements, income statements, expense reports, and details of recent renovations or improvements.

• Provide Access to the Property: Arrange for the appraiser to have full access to the property, including all areas and facilities, to conduct a thorough site visit.

• Detail Property Improvements: List any recent improvements or upgrades made to the property, as these can significantly impact its value. Include dates, costs, and descriptions of the work completed.

• Organize Financial Records: Prepare and provide detailed financial records for the property, including income and expense statements, tax bills, and leases which are crucial for the income approach.

• Inform about the Market: If you have knowledge of recent sales of comparable properties or current market trends affecting your property type, sharing this information can assist the appraiser in their market analysis.

• Prepare Questions: Have a list of questions or concerns ready to discuss with the appraiser, ensuring clarity on both sides regarding the appraisal's scope and purpose.

Why do I need a commercial property appraisal?

You might require a commercial real estate appraisal for various reasons, primarily involving financial, legal, or transactional activities. These include securing a mortgage or refinancing, determining a property's sale price, assessing property taxes, facilitating business mergers or acquisitions, and settling estates or divorce proceedings. An appraisal provides an objective valuation that helps stakeholders make informed decisions, ensure fair dealings, and comply with regulatory requirements, reflecting the property's market value under current economic conditions.

How is the value of a property determined?

The value of a commercial property is determined through several methods, the most common being the income approach, the direct comparison approach, and the cost approach. The income approach estimates value based on the income the property generates, considering its potential to produce future income. The direct comparison approach compares the property with similar properties that have recently sold in the area, adjusting for differences. The cost approach calculates what it would cost to replace the property's improvements, less any depreciation, plus the land value. Each method provides a perspective on value, and the most appropriate method depends on the property type, its use, and the availability of data.

How much does a commercial appraisal cost?

The cost of a commercial appraisal can vary widely depending on several factors, including the complexity and size of the property, its location, the purpose of the appraisal, and the level of detail required in the report. Generally, fees can range from a few thousand dollars for smaller, less complex properties to tens of thousands of dollars for large, unique, or highly complex commercial properties. The appraiser's expertise and the time required to complete the appraisal also influence the cost. Given the variability, it's advisable for property owners or stakeholders to inquire for a quote on their specific property and project requirements to get an accurate idea of the costs involved.