One of the biggest factors that Commercial Real Estate (CRE) appraisers consider when making an appraisal is similar properties in the area and how much they have sold for. Comparable properties, or comps, play a big role in most valuations. However, what happens when there is not a clear sales comp due to the unique nature of the property, the lack of similar properties or other factors? That is where the expertise and experience of the appraiser come into play.
First, the appraiser will verify all information provided on the property. Many appraisers start with CoStar/MLS to gather basic lead data, but with unique properties, that information will be scrutinized. All lead information needs to be cross-checked with different public records. For example, if CoStar/MLS says that a property has access to public utilities but the public records are counter to that, the appraiser will take that into account when confirming.
Evaluating the Cost or Income
Two of the most common methods for handling valuation when there is not a clear sales comp include the cost approach and income approach. Using the cost approach, the appraiser will start by determining the value of the land that the property is on based on comparable land in the area. Then, they will evaluate what it would cost to rebuild the improvements with the same utility. Using the income approach, an appraiser will consider the income potential that the property could produce.
Rural areas can be challenging in finding comps, but the same can be true in dense urban areas where properties move on the market very quickly or a sudden construction boom has been occurring. That’s why skilled appraisers use cutting-edge software and technology to identify the freshest comps in the same area that have traded, in similar submarkets, or leased to tenants with similar risk.
Partner with Willowbrook Valuation & Advisory Services for Your Difficult Property Appraisal
At Willowbrook Valuation & Advisory Services, we are a leader in trusted insight, cutting-edge innovation and customer service. We offer exceptional CRE appraisal services and remain dedicated to offering every client the individual valuation service they expect with the capabilities and expertise of a larger firm. To learn more about our valuation and advisory services, please contact us at (202) 919-3888.