5 Key Considerations When Vetting Commercial Real Estate Appraisal Firms Wednesday, February 01, 2017
Over the last few years, Central Ohio real estate, especially within Columbus, has been highly sought after. That’s why choosing the right commercial appraisal firm is essential to ensure you get a thorough, accurate assessment of the value of your commercial property.
Since commercial real estate appraisals involve a much more complicated process and are more subjective than residential property appraisals, you want to make sure you select an experienced commercial real estate firm that is familiar with the type of property you need to have assessed. Why leave the valuation of your investment in the hands of just anyone?
So, how do you know which firm is best for your investment? Below are five key considerations when vetting (and ultimately settling on) an appraiser for your commercial real estate.
Location, Location, Location
For general property types, it’s best to find a commercial real estate appraiser who is familiar with the area. Therefore, hiring a local appraisal firm may be your best option; local appraisers are more likely to be knowledgeable of current market values and similar properties in the area. If your property is a specialized type, though, looking out of your area – or even state – for a firm that is experienced with assessing your property type may be an ideal solution to get the most accurate valuation.That being said, hiring out of the area may also be a good option to ensure you get an appraiser that is unbiased and without preconceived notions about the property. After a series of widely varying appraisal values over the years, Ohio’s Portsmouth City hired The Robert Weiler Company to conduct an independent commercial appraisal of the Marting’s Building. Taking on The Robert Weiler Company was unique because Portsmouth City sought an appraiser outside of their region to find an experienced firm with no vested interest in the property. The Robert Weiler Company appraised the city’s building at $215,000, despite the Portsmouth City Council receiving much higher appraisals as recently as 2002. Portsmouth City Manager, Derek K. Allen, appreciated the honest and accurate appraisal, stating that he “… called one of the top real estate firms in Columbus. So I was getting an impartial objective appraisal… we need[ed] an appraisal, in case anybody would ever come forward saying they were interested in obtaining the building.”
Verify Appraisal Certifications
The requirements for appraisal certifications are regulated by individual states; however, most states require a commercial real estate appraiser to have a Certified General License. You can verify their license with the Appraisal Subcommittee’s (ASC) National Registry before committing to anything. Under federal law, the appraiser must be registered and active to practice. The Registry will also indicate if the appraiser has current suspensions or revocations of their license.Also, you can ask the appraiser if they have other specialized designations such as ASA (American Society of Appraisers) or MAI (Member Appraisal Institute); this may demonstrate that they’re committed to improving their education and furthering to develop their skills in valuation and analysis. Appraisers holding specialized designations have been held to a higher standard than those only possessing general certifications.Find out who will be doing the actual inspection and writing up the report; ensure that they are the person who holds the certification. When they arrive for the inspection, don’t hesitate to request that they show you a copy of their license before getting started.
Most commercial appraisers will be able to provide you with their qualifications – such as a resume, an outline of their experience, or references. An experienced appraiser will be more familiar with the ins and outs of commercial appraisals, along with the best resources and approaches. Ask for a list of the appraisals they’ve done within the past year, the types of appraisals they have completed, and the market areas in which they are familiar. Find out how long they’ve been an appraiser – being relatively new to the industry isn’t necessarily a deal-breaker, but it does give you a better picture of their overall experience.Inquire about the techniques and approaches they plan to use for your property and compare their answers with those of other appraisers to determine whether their methods will be thorough enough. A good commercial appraiser will also be able to provide you with references from lenders, real estate lawyers, real estate agents, and accountants who are familiar with their work.
Familiarity with Your Property Type
Ask your appraiser if they have experience with your specific type of property. All appraisers must follow a strict code of ethics, as outlined by the Uniform Standards of Professional Appraisal Practice (USPAP); According to their competency rules, the appraiser must have sufficient knowledge about the project and be competent enough to complete it. Otherwise, they must disclose any limitations and inexperience ahead of time. If they do not have experience with your property type, ask them how they plan to familiarize themselves with it; this will allow you to make an informed decision in regards to whether they will be worth the risk.Choosing an appraisal firm that is experienced in your property type will result in a more accurate and cost-efficient assessment. Recently, The Robert Weiler Company was hired by Grandview Heights City School District to conduct a reappraisal of the Grandview Yard property in order to assess whether or not the school district would receive additional tax income. The Robert Weiler Company’s appraisal valued the property at $16.5 million, an amount vastly different from the tax auditor’s assessment of $13.5 million. Originally determined to be a mix of 76% residential and 24% commercial, the reappraisal also found the property to be a split of 83% residential and 17% commercial. The initial appraisal from the tax auditor underestimated its 2016 property taxes by $17,146; money that should have gone towards improving infrastructure in the Grandview Heights school district, in Columbus, Ohio.
You Typically Get What You Pay For
Don’t be put off by big costs – a commercial real estate appraisal is much more complicated and in-depth than a residential appraisal, which means more time and a much higher fee. Some people are surprised to learn that the inspection is just a minor portion of a lengthy process. These types of appraisals require a large amount of research beyond the inspection – involving property taxes, market area, highest and best use, descriptions of improvements of the property, zoning and ownership records, and more – before generating a comprehensive narrative report containing the property valuation. Ask for an estimated timeline to complete the project.Take into account the appraiser’s location, education and certifications, experience, and other qualifications when determining whether the cost is right for you. It’s wise to be cautious with appraisers willing to charge you lower than average prices – and it’s okay to ask questions to find out why they are lowballing the price. You don’t want to skimp on something this important – a quality commercial appraisal is worth every penny.
Where Do You Go from Here?
As a Columbus-based commercial real estate firm with almost 80 years in business, we’ve witnessed the ups and downs of the market and the changing landscape within Central Ohio and beyond. That’s why we’re called upon time-and-time again to provide our expertise in various real estate-based situations, whether it be raw land for sale or land development, property management, property brokerage, real estate consulting, or commercial property appraisal services. Call 614-221-4286 to find out how The Robert Weiler Company can assist you.