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What is in an Commercial Appraisal Fee?
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In the early 1990's, after the real estate market bust, the federal government put forth a set of appraisal standards, called the Uniform Standards of Professional Practice (USPAP). This binds licensed
appraisers to ensure everyone receives a fair market value on the property.
The first factor that determines an appraisal fee is the complexity of the
assignment. This essentially means, the customer is paying for the time the
appraiser spends evaluating the property. Depending on the size of the property,
the time spent could range from a day to a week. Also, the approach used in the
process will affect the time factor. Some cases are best for the cost approach,
while others are suited for the highest and best use approach.
The second thing to consider in the appraisal fee is the availability of data. There is a lot of information that goes into a thorough
appraisal including survey of the property, deed or title report showing the legal description of the property, a copy of the original plans, financial and operating statements, leases and any other pending contracts. If there are any missing documents the process can take longer. The outside information an appraisal needs determines the market value. This data is gathered by comparing the property with other properties in the area of similar size and function. If that data is not available or hard to gather the process may take longer or another approach may need to be taken.
The third step of the appraisal process is drawing up the report. There are three reports an appraiser can compose; a full-narrative, a summary narrative, and a restricted report. According to FDIC rules an appraiser must give at least a summary report if there is a third party involved in the process. The more complex the
appraisal the more likely the report will be a full-narrative. A
restricted report is only allowable if the customer needs to determine the value
for buy/sell purposes or determine their own net worth.
The fourth and final piece of the process is the turn-around time. Again, time is a huge factor in the appraisal price. If the
appraisal needs to be done in the matter of days or weeks the price varies according to the time the appraiser has to put in to the
appraisal and the amount of time given to be done.
The best way to get an affordable appraisal is giving the appraiser the most amount of time possible to go through the feasible. If possible, request a restricted report. Make sure to have all necessary documents in order to give to the appraiser up front. The less time collecting data will effect the cost in the long run. Overall, do what is possible to make the process go smoothly, that will ultimately be the biggest money saver.
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