Insight on the Commercial Appraisal Process

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Once a commercial buyer reaches the appraisal process, they are very close to the finishing table. However, the deal is not finished just yet. Not until the appraisal is complete and both the buyer and seller agree on its terms can the purchase move toward the final stages. To familiarize yourself with the process, learn more about what you should expect.

The Truth Is Revealed

The goal of the appraisal is to assess an accurate valuation of the property. An accurate valuation ensures the lender is loaning an appropriate amount to the buyer for the purchase of the property.  

Since the lender is usually the client of the appraiser, you can rest assured that the appraiser will review every detail of the property and discover any untruths before they assign a value to the property. Although the process is not the same as a property inspection, it can help expose any potential misguiding on the part of the seller.

An Agreement Must Be Made

Make certain you understand that based on the findings—an agreement must be made. In an ideal scenario, the value of the appraisal will be equal to, or greater than, the contract price. However, sometimes the appraisal reveals that the value of the building is lower than the agreed-upon price. 

In this case, the lender will only lend the value of the commercial property. As such, unless the buyer has the cash on hand to cover the difference, the buyer and seller will have to agree to meet in the middle or even to lower the contract price. Either way, for the process to move forward, an agreement must be made.

A Challenge Is an Option

It is worth noting that appraisers hold a lot of power, but just because you do not like the appraiser's report, it does not mean that the commercial transaction is done. You can challenge the report. 

Your real estate agent, as well as the buyer's agent, can generally provide comps to the appraiser, which are essentially comparable properties in the area, that have sold for, or above, the contract price. The agents can also provide more information about the property to help show the appraiser that the property is worth more than what is listed in the report. 

Whether you are the buyer or the seller, be sure to partner with commercial real estate appraisers. They can explain more about the process.