When it comes to buying and selling commercial real estate in the Boston area, an appraisal is a standard step in the process. Going into the appraisal, business owners must keep in mind that a commercial appraisal is vastly different from a residential one.
There are some basics that all business owners should know going into an appraisal. Here are the top four things to know:
No. 1: Be upfront and honest with the appraiser
The appraiser is probably going to ask for quite a bit of information, including property tax bills and income statements. Keep in mind that appraisers are not asking for this information just to create more work. Rather, this information is necessary. Along these same lines, keep in mind that appraisers are not just going to take your word for everything and it is best to be completely honest with them. Their job is to ask you questions, but they also verify the information from other sources.
No. 2: The actual inspection is just a small part of the appraisal process
The appraiser may be at the property for less than one hour, or several hours. However, the entire appraisal process does not happen just during this time. Rather, the appraiser will also be doing outside research, such as pulling zoning records, compiling comparable sales in the area and figuring out replacement costs. While the inspection itself may take only a few hours, the entire appraisal process can take days or even weeks.
No. 3: Be specific with the type of appraisal you want
If you are requesting an appraisal, be up front about what your purpose is. For example, if you only want to know how much a warehouse is worth, you want a “fee simple interest.” However, if you are thinking about buying a business and want to know the value of the lease to that business, you want a “leasehold interest.”
No. 4: An attorney can help with real estate transactions and contracts
Getting an appraisal done is just one piece of the commercial real estate puzzle. Depending on the goals of the business — and how the appraisal turns out — next steps could involve drafting purchase or sale agreements, or even the creation of development plans. Having the same attorney to guide you through the entire process — no matter what path it may be — can be an invaluable tool toward long-term success.