How Long Does a Commercial Appraisal Really Take?

At 10:03 on a Monday morning, a property owner calls an appraisal firm with a seemingly simple question:

“I need the value of my commercial property. How soon can you get the report to me?”

The answer is rarely, “Give me a few hours.”

Commercial property owners often contact an appraiser when there is already a deadline approaching. A lender may be waiting for the appraisal before moving forward with financing, a closing date may be scheduled, a property may be under contract, or an owner may need a valuation to make an important business decision.

In fact, the appraisal is often one of the last pieces of the puzzle in the loan process. By the time the appraiser receives the call, several other parts of the transaction may already be moving forward and everyone wants the appraisal completed as soon as possible.

But a commercial appraisal is not simply a matter of visiting the property, taking a few photographs, finding several nearby sales, and producing a value by the end of the day.

Depending on the property and assignment, the appraiser may need to analyze comparable sales, leases, rent levels, operating expenses, capitalization rates, zoning, property records, market conditions, development potential, and other factors. Some properties require considerably more research than others.

So, how long should a commercial appraisal realistically take?

For many assignments, the answer may be anywhere from several days to a couple of weeks. More complex properties or assignments can take longer; and what if you truly need it ASAP?

Expedited appraisal services may be available depending on the property, the appraiser's existing workload, and the requested delivery date. However, an expedited assignment may involve an additional fee because the appraiser must prioritize the assignment and potentially rearrange other scheduled work. More importantly, a shorter turnaround should never mean sacrificing the research and analysis necessary to produce a credible appraisal.

So, before assuming a commercial appraisal can be completed overnight, it helps to understand what actually happens between the initial phone call and delivery of the final report.

Let's take a look at the commercial appraisal process and what can affect the timeline.

First Things First

Before an appraiser can determine a credible value for a commercial property, they need to understand the property and the market surrounding it.

This may involve reviewing:

• The property's location and physical characteristics

• Current and historical market conditions

• Comparable property sales and listing

• Rental rates and occupancy levels

• The property's income and operating expenses

• Zoning and permitted uses

• Development potential

• Highest and Best Use analysis

• The condition and quality of the building

• Relevant ownership or property information

• The purpose and intended use of the appraisal

In other words, there's a lot of work that goes into appraising a commercial property that is beyond property inspection.

So, What is the Typical Timeline?

Now that you understand that a commercial appraisal involves much more than a property inspection, I want you to also understand that there is no universal timeline for every commercial appraisal because no two properties, or markets are exactly the same. 

A relatively straightforward commercial property with readily available information may take a few days to a couple of weeks to complete. Other properties in more peculiar situations like large properties, properties with complicated income streams or that require extensive market research. 

So, what exactly happens during these days? 

1. The Appraisal Assignment is Defined: So before the actual evaluation begins, the appraiser needs to understand what the appraisal is needed for. Is it needed for financing, or a potential sale, or an acquisition, or tax purposes, estate planning, insurance, etc.? 

The purpose of the appraisal matters because it helps determine the appropriate scope of work, the valuation approach, and the information required. The appraiser will need basic information also about the property, including the address, the details of ownership, the type of the property, and any relevant documents that may be available.

This initial stage can be relatively quick, depending on how fast the information is provided.

2. The Inspection of the Property: Now, after the reason for the appraisal has been established, the next stage would be to go for property inspection; and this particular stage is when most property owners think an appraisal has taken place. However, the inspection is usually done so the appraiser visits the property to see and understand what is actually there. 

They are there to examine the building size, the layout, construction, the age of the building, condition, quality, finishes, amenities, the parking, the characteristics of the site, and overall functionality. They may also look at things that photographs and documents simply cannot tell. 

For example, two buildings may have the same square footage on paper, but one may be significantly better maintained or more attractive to potential tenants, and these differences matter in appraisal and valuation. This inspection could take anywhere from a relatively short visit to several hours or more, which affects your timeline. 

3. Market Research: The value of a commercial property is influenced by the market, and an appraiser needs to take time to research and understand the current conditions and market behavior, that is, how buyers and sellers and investors are behaving in the market. 

This would include researching recent sales, asking prices, rental rates, vacancy levels, market trends and other factors relevant to the property. Now, you as a property owner may look at a property similar to yours and think its price should also be comparable. However, the appraiser has to determine whether the properties are actually comparable in terms of location, size, use, condition, age, quality, income, characteristics and other relevant factors, and all of these take some time to investigate.

4. Analysis Stage: Now, at this stage, the appraiser has gathered all relevant market information and proceeds to analyze every information they have gathered on the property. Depending on the property, they would choose the appropriate valuation method, which we have talked about in another blog article. 

So, the different pieces of evidence are analyzed and reconciled into a final opinion of value, and the appraiser applies their professional judgment to determine the true worth of a property, supported by the available market evidence and the analysis they have carried out. 

5. Preparation of the Report: Finally, the appraiser documents their report in a professional appraiser report. This report is usually a compilation of the property's description, market analysis, comparable evidence, calculations, photographs and final valuation conclusion. 

Most times, this report also goes through an internal QC process, depending on the appraisal firm. After this, the report is delivered to the client. 

Conclusion 

From all we have discussed, a commercial appraisal can take anywhere from several days to a couple of weeks, from engagement through the delivery of a completed report. The actual timeline depends on the property type, complexity of the assignment, availability of market data, and scope of work.

Sometimes, clients understandably need an appraisal completed quickly because a lender is waiting, a closing is approaching, or another transaction deadline is pending. While these concerns are valid, it is important to establish a realistic timeline with the appraiser and other stakeholders. The goal should not simply be to get a number as quickly as possible. It should be to obtain a credible, well-supported opinion of value within a reasonable timeframe.

It is also important to recognize that not every part of the appraisal timeline is within the appraiser's control. There may be times when the appraiser is waiting for information or clarification from the client, property owner, lender, broker, or another point of contact. In other cases, new information about the property may be discovered during the appraisal process.

For example, an appraiser may uncover an unreported lease, a recent transaction, a zoning or permitting issue, discrepancies in the property information, or another factor that requires additional research. Depending on its significance, the appraiser may need to go back to the client or lender for clarification before the assignment can proceed.

Clients can help avoid unnecessary delays by providing relevant information at the beginning of the engagement. This may include leases, rent rolls, operating statements, property tax information, plans, surveys, prior appraisal reports, if applicable, and other documents requested by the appraiser. It may sound simple, but missing documents and unavailable information can add unnecessary days to the process.

If you have a firm deadline, communicate it to the appraiser at the beginning of the engagement. This allows the appraiser to determine whether the requested timeline is realistic and to make every reasonable effort to work toward it.

At Bluemark Valuations, we handle commercial appraisals for a wide range of property types and understand that every client and transaction has a different timeline. We work diligently to complete each assignment within a reasonable timeframe while providing a credible, professional, and well-supported opinion of value.

If you need a commercial property valuation or would like to discuss the expected timeline for an assignment, contact Bluemark Valuations at (727) 337-6390.