Who Asks For A Commercial Real Estate Appraisal?

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Who Asks For A Commercial Real Estate Appraisal?

1 July 2022
 Categories: Real Estate, Blog

Commercial real estate appraisals can help organizations place values on their facilities and buildings. The range of parties that may ask for commercial property appraisals, though, is wider than you might expect. People in these 5 situations will often request commercial real estate appraisals.


Placing a price on a property isn't always easy. While you might have some idea of what the location is worth to your organization, it can be tough to establish what the fair market value might be. Fortunately, a commercial real estate appraiser can assess the property, the surrounding supporting infrastructure, and the current market. They can then present a report outlining how the piece of CRE performs in these areas and what it's likely worth. This can be immensely beneficial during the negotiation process.


In the same way that buyers often don't know what value to assign to a property, sellers also can struggle. This is often worse for sellers because they're almost always the first folks to assign a number to the property's value. Basing your asking price on commercial property appraisals, you can start at a fair price.


When an insurance company has to price a policy for a property, it may need an appraisal to assess its risk exposure. The insurer can then determine what the replacement value of the property and its facilities might be. If there's a catastrophic event, this allows the insurance company to limit or hedge its risk.


Commercial property appraisals also have value when it comes to financial reporting. If a publicly-held company has to report its assets based on SEC rules, for example, it may need to appraise the value of the real estate in its portfolio from time to time. An accountant can then use the appraisal to report the value of the property based on financial reporting practices.

Especially if a property's value has gone up, this can be important. A company can use its assets as leverage to obtain loans, for example. Similarly, investors often look at a company's asset values to assess its overall financial health.

Acquiring Parties

In the same way that investors and regulators want to know a company's asset, so too will any party that's part of a proposed merger or acquisition. An acquiring company may assess how much it's willing to pay based on the liquidation value of the assets it's proposing to take on. This is often a big chunk of the margin of safety in an acquisition so it can make or break a deal.