March 22, 2017

4 Things To Understand About Commercial Real Estate Appraisals

Before deciding on a commercial property, it is imperative to get a CRE appraisal beforehand. A CRE appraisal is a Commercial Real Estate appraisal and it varies substantially from appraisals done for residential properties. In the following article, Rakow Group will provide you with 4 key pieces of information regarding your CRE appraisal. If you are interested in commercial property for lease, throughout Westchester and Fairfield counties, then you should contact the Rakow Group today.

Here is a look at the top four things property owners should be aware of when seeking an appraisal.

Residential vs. Commercial Real Estate Appraisals

There a number of differences between the appraisals of residential properties in comparison to the appraisals of commercial properties. The fundamental difference is based on the income-producing potential of commercial properties. Appraisals involving commercial properties require a greater amount of research and analysis, with three factors considered of value; the costs, the income opportunities and the sales comparison.

In addition, commercial real estate appraisal fees are higher than those of residential ones purely because of the time spent. It’s common for commercial appraisals to analyze thoroughly the following: the income potential, any leasing info as well as any income and expense information. In comparison, residential appraisals are more straight-forward and less time-consuming.


When completing your appraisal it’s of vital importance to always comply with the “Uniform Standard of Professional Appraisal Practice” (USPAP) code of ethics. This is the universally recognized association to conform to when working in the appraisal profession. The USPAP has long established rules and confidentiality when concerning property appraisals. Furthermore, it requires an unbiased opinion of value from all appraisers. Adopted by Congress in 1989, the USPAP provides standards for all types of appraisal services.

Scope of Work

Every appraisal of commercial real estate has to have a clear scope of work defined. The scope of work should include the level of research and detail required for each particular job. This is included to produce reliable and honest results that are appropriate for the appraisal report.

To determine the full scope of a project, it’s important to identify the following parts;
– Intended users and clients.
– Type & definition of value (i.e. investment, foreclosure, market, etc.)
– Intended use of the appraisal.
– Hypothetical conditions including extraordinary assumptions.
– Typical client expectations.
– Typical appraisal work by colleagues for similar projects.
– The effective date of the appraisal.

It’s not uncommon that a complex property will have a more expansive scope of work than that of a smaller property.

Best and Highest Use

The most important factor in a commercial appraisal is the best and highest use of the property. This is the foundation on which the valuation is based. This determines which possible and permissible uses will provide the property owner the highest return on investment. The potential uses are then narrowed down to those which are first, financially feasible and second, economically supported for the particular property. It is then up to the appraiser to identify which remaining uses would be the most productive and profitable for the property.

To conclude, there are a number of factors to understand when completing your commercial real estate appraisal. The factors vary depending on the size of your property as well as the plans you may have anticipated for the future. When searching for commercial property for lease, across Westchester, Fairfield and beyond, consider the Rakow Group.

Give them a call now on (914) 422-0100 x10 or (203) 359-5703 x10.

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