How Accurate are Commercial Real Estate Appraisals?

Understanding the accuracy of commercial real estate appraisals, and the factors that can affect it.
commercial real estate appraisal accuracy
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Jeff Weiner

CEO & Co-Founder | Transforming Commercial Real Estate Valuation | B2B SaaS Product Innovator | Creating Amazing Software from Zero to Scale | Longevity Enthusiast

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How Accurate are Commercial Real Estate Appraisals?

Commercial real estate appraisal accuracy can vary depending on a number of factors. For example, the qualifications and experience of the appraiser, the quality and quantity of comparable sales data available. Furthermore, it’s always crucial to consider the unique characteristics of the property being appraised.

In general, commercial real estate appraisal accuracy is usually be high when the work is performed by a qualified, experienced appraiser who has access to relevant market data to make strong conclusions. However, there may be some uncertainty inherent in any appraisal. The final value estimate may be different from the actual sales price when the property is eventually sold. The value may also differ from, for example, a tax assessment where the assessor considered different factors.

Guidelines

The Appraisal Standards Board of the Appraisal Foundation sets guidelines for the appraisal profession, with the USPAP (Uniform Standards of Professional Appraisal Practice). USPAP establishes the Standards of Professional Appraisal Practice which are followed by appraisers. There are periodic audits and assessments to ensure compliance with the standard.

It is important to note, however, that even with the best-performing appraisals methods, appraisals can still be off by a margin. In addition, it’s possible for appraisals to be influenced by factors that may not be fully reflected in the comparable sales data or the appraiser’s analysis, This can include changes in the broader economy or local market conditions.

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Maximizing Accuracy

The commercial appraisal process can be a very manual-intensive endeavor. In fact, most commercial appraisers rely solely on a word processor and spreadsheet. An alternative platform like Realquantum eliminates a lot of the tedious manual work. This allows the appraiser to focus on the analysis process while avoiding errors in math or document formatting.

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