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The term appraisers are commonly used for residential appraising. This is because in most of the cases people get to interact with appraisers when they need to purchase properties. Both the jobs of a commercial real estate appraiser and residential appraiser follow the same principles but when it comes to popularity, residential appraisers win the race.

In simple words, the role of a commercial appraiser Hamilton is to determine the value of various commercial properties such as land, office and industrial building, hotels and shopping centers. Each type of commercial property valuation demands different levels of proficiency. Appraisers mainly depend on one of the three types of analysis to complete a valuable process which are the cost approach, the sales comparison approach and the income approach.

The cost approach

Under the cost approach, the valuation is done on the basis of the cost required to build a house. The approach is framed under the concept that the participants always link the cost with the value. In simple words, a well-informed person would not invest on a property if it was not even worth the cost to construction. Firstly the appraisers calculate the cost to construct the property and then make necessary deductions for functional problems, physical deterioration and external market factors.

The income approach

This particular approach depends on the earning capacity of the property. Under this concept, it is believed that an investor will buy a property on the basis of the expected income stream. In order to estimate the net operating income of a property, appraisers review various sources including comparable properties, historical operating data and other market information. The most frequently used process of estimating an income approach is the direct capitalization method. In this case, the valuation is done by dividing the net operating income by a capitalization rate which is calculated by dividing the net operating income by the sale price of a property.

Why commercial appraisals are needed

It is the duty of a commercial real estate appraiser to use these tools to determine the value to solve the valuation issues for different requirements. Appraisals are most commonly needed for new loans. Besides this, other situations for which an appraisal is required include real estate tax purposes, distributing assets during a divorce proceeding and for domain work.

The appraisal process starts with defining the scope of the assignment and selecting the tools required to be used to solve the valuation issues. Then the appraiser thoroughly scrutinizes the property to get an idea about the quality and condition of the property. At the final step, of the valuation method, mentioned above is used to estimate the value.

How to become a commercial real estate appraiser

The Appraisal foundation has mentioned about the minimum requirements for licensing, but these requirements vary from state to state. According to the Appraisal Foundation, you must at least hold a bachelor’s degree, 300 hours of coursework and 3,000 hours of work experience under the supervision of a general certified appraiser.