Commercial property valuation

Estimating the value of real property is important to a variety of endeavors, including real estate financing, listing real estate for sale, investment analysis, property insurance and the taxation of real estate. For most people, determining the asking or purchase price of a property is the most useful application of Commercial property valuation. We will provide an introduction to the basic concepts and methods of Commercial property valuation, particularly as it pertains to real estate sales.

Basic valuation methods

Value A main consideration in appraising is to determine a property’s value: the present worth of future benefits arising from the ownership of real property. Unlike many consumer goods that are quickly used, the benefits of real property are generally realized over a long period of time. Therefore, an estimate of a property’s value must take into consideration economic and social trends.

Market Value An appraisal is an opinion or estimate regarding the value of a particular property as of a specific date. Appraisal reports are used by businesses, government agencies, individuals, investors and mortgage lenders when making important decisions regarding real estate transactions. The goal of an appraisal is to determine a property’s market value: the most probable price that the property will bring in a competitive and open market. Market price, the price at which a property actually sells, may not always represent the market value. For example, if a seller is under duress because of the threat of foreclosure, or if the property was sold in a private sale without being exposed to the open market, the property may sell below its market value.