A typical commercial appraisal inspection will take anywhere from 20 minutes to over an hour, depending on the property. The appraiser will inspect both the interior and exterior of the subject property and also the neighborhood. Both interior and exterior photographs will be taken, and in most cases the improvements will be measured. The appraisal report will contain as much information on the property as possible. Included will be a description of the exterior and interior, and any additional features. There will be a section of the report which describes the general economic factors impacting value, the neighboring area, the lot size, shape, gross building area and any other relevant information regarding the site or improvements.
Then the process of valuation begins. When applicable, a Cost Approach is provided. The appraiser uses various methods of estimating a cost to reconstruct and depreciate the building, and then adds the estimated site value to arrive at an indication of value. This approach is not always applicable, based on the age of the buildling. In the Income Approach, rental comparables are analyzed to estimate a market rent for the subject, from which expenses are deducted and the net operating income is then capitalized into an indication of value.
The Sales Comparison Approach is the one approach that is almost always used. In this approach, properties that have sold are reviewed. The four or more properties that are most similar are compared to the subject on a feature by feature basis. The appraiser will make adjustments to the comparables where the properties differ and a value indication will be reached after considering the adjusted sales prices.
Finally, the applicable methods are reconciled and the final value for the property estimated.