How to buy commercial real estate

When it comes to understanding commercial real estate values and just business real estate in general, small business owners have a lot to process and understand. Although much of the aftermath of the Great Recession has come and gone, it forever changed the way both residential and commercial property owners and buyers thought of real estate investment strategies and which real estate investments would yield the most reward. That’s why it’s so important for small business owners to have even a basic understanding of the best practices in terms of how to buy commercial real estate and commercial real estate values.

One of the most important aspects in terms of understanding commercial real estate values is becoming familiar with the appraisal process. A small business owner, or any business owner for that matter, may want to get an appraisal done on a piece of commercial property for a number of reasons. Aside from wanting to purchase or sell the property, a business owner may also order an appraisal in order to establish the value of it in preparation for leasing it or filing a property tax appeal.

Regardless of why an appraisal is needed for commercial property, small business owners can gain the most from the experience by understanding a few key things in terms of how commercial real estate values are determined. Preparing for the appraisal process can work wonders in terms of ensuring it goes as smooth as possible.

Here are a few things small business owners should keep in mind when it comes the appraisal process and exactly how commercial real estate values are determined.

The inspection is only one piece of the appraisal puzzle

The time it takes to properly inspect a commercial property in order to determine its value depends greatly upon the property’s size and complexity. Some appraisals can be performed in under an hour while others may take several. Many small business owners assume the property inspection makes up the entire appraisal process but in reality, it’s just the tip of the iceberg. In addition to inspecting a property, professional appraisers also research zoning records, public ownership, and the demographic of the surrounding area and the lifestyle or habits of said demographic in order to determine the overall value. Depending on the circumstances, the appraisal process can take few days or several weeks.

Just stick to the facts

If there’s anyone that can smell a rat, it’s a professional appraiser, so it’s important to remember that honesty is always the best policy. Appraisers will go above and beyond to verify the information you provide, and rest assured that they’ll be able to find any discrepancies. Often times, a professional appraiser will ask questions that they already know the answer to in order to establish the credibility of the property owner. Always thinking one, two, or three steps ahead, appraisers are ready to defend their findings with research and evidence, so misrepresenting information will only reflect poorly on you.

Oh, and omission is lying too…

Withholding valuable information about a commercial property, or in other words lying by omission, is still considered a misrepresentation of information. As such, it’s important to provide all the necessary paperwork that the professional appraiser might ask for, such as income statements, a recent property tax bill, or even a set drawings for the building. These documents help to establish the true value of the property, and may come in handy in the event you choose to dispute the appraiser’s values. Regardless of what kind of documents are requested, make sure you give them up! Remember, the more information you provide the faster the process can and will go.

Understand who the client is and what that means

If an appraisal is being done to determine financing eligibility, then the client is the lender. Professional appraisers are required to maintain client confidentiality at all times, which means as a borrower, the appraiser will not be able to release any details of their findings to you. If the appraisal is for property tax purposes, rest assured the appraiser won’t rat you out.

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