Selling commercial property is a complex process, laden with challenges and opportunities. Maximizing return on your investment and knowing that your property is sold at its market value is critical.

Understanding Market Value

Market value is defined as the most probably price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• Buyer and seller are typically motivated
• Both parties are well informed or well advised, and acting in what they consider their best interests
• A reasonable time is allowed for exposure in the open market
• Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto
• The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale

Determining the accurate market value for a commercial property (or residential property) is crucial no matter whether the purpose of the appraisal is, buying, selling, estate planning, investing or others. Many factors influence the value, and include the property's location, condition, and current real estate market.

Some of the Factors Affecting Commercial Property Valuation

1. Location: The geographical location of your property significantly impacts its market value. Properties in prime locations, such as urban centers or growing commercial districts like Waxhaw and Indian Land, tend to sell for higher prices due to increased demand.
2. Condition: The physical state of the property, along with how the property has been maintained over the years, affects valuation.
3. Market: Economic conditions such as interest rates, and local real estate trends play a pivotal role in determining property values. Real estate appraisers much know the market that they are appraising in so they are aware of current trends and planned improvements or changes for the area where the property is located.

How to Market Value is Determined

Appraising the market value of a commercial building involves a systematic process that typically includes the following steps:

1. Define the Purpose of the Appraisal: Determine the reason for the appraisal, such as sale, financing, tax assessment, or investment analysis. A real estate appraiser will ask a client about why the appraisal is needed. An appraiser is required to understand the purpose of the appraisal per established guidelines in the industry. This gives an appraiser a high level view of the property, the appraisal report use and why they are appraising it.

2. Gather Preliminary Information: Collect basic information about the property, including its location, size, age, and zoning. This may involve reviewing property records and relevant legal documents. This step is critical and very time consuming. Appraisers will analyze town and county data they have gathered online and in person at assessor's offices quite often. Extensive time is spent researching property history, deeds and land plans in many appraisals.

3. Conduct a Property Inspection: Visit the property to assess its condition, features, and any unique aspects that might affect value. This includes evaluating the layout, materials, mechanical systems, and overall maintenance. Physically inspecting the property with the owner or a representative is a critical step in the appraisal process. Walking the parcel and getting a good understanding of the property is necessary and this process also allows the appraiser to observe the property location and the surrounding improvements such as gas stations, banks, highways, etc.

4. Research the Market: Analyze the local real estate market by studying comparable properties (comps), recent sales data, and current market trends. This helps in understanding the demand and supply dynamics in the area.

5. Choose the Appropriate Valuation Method: Select one or more of the primary appraisal methods:
   • Cost Approach: Estimates the value based on the cost to replace or reproduce the property, minus depreciation.
   • Sales Comparison Approach: Compares the property to similar properties that have recently sold, adjusting for differences.
   • Income Approach: Calculates value based on the property’s ability to generate income, using metrics like net operating income (NOI) and capitalization rates.The appraiser determines which approaches to value are applicable to the property being appraised. It depends on the property. For example, the income approach may not be used if the property is not income producing. Many owner occupied commercial properties or single tenant properties do not have a rental history or the location market rent for a single tenant property may be too low for this approach to be applicable.

6. Perform Financial Analysis: For income-producing properties, analyze financial statements, lease agreements, and operating expenses to determine the income potential. If the owner or representative can provide these items for the appraiser at the time of inspection, it assists in the appraisal process.

7. Develop the Appraisal Report: Compile findings, analyses, and conclusions into a comprehensive report. This should include data supporting the chosen valuation methods, market analysis, and any assumptions made during the appraisal.

8. Review and Revise: Before finalizing the report, review it for accuracy and completeness. Make any necessary adjustments based on feedback or additional insights.

9. Deliver the Final Report: Present the appraisal report to the client, ensuring it meets any required standards and regulatory guidelines.

10. Follow-Up: Be available to discuss the appraisal findings and clarify any questions the the client may have regarding the report or valuation process.

In conclusion, each of these steps is crucial for arriving at an accurate and credible market value for the commercial (or residential) property being appraised. Hiring a licensed Certified General real estate appraiser for the appraisal of a commercial property is a fundamental step in obtaining an objective valuation of your property.