Why Does One Need Appraisal Of A Commercial Property?


Commercial real estate appraisal is a process of finding out the value of the commercial property. The commercial property can be office building, industrial building, shopping mall or shopping centre and even land for sale. The assessment from time to time of the value of a commercial property is helpful in various ways. Here we look at some of the most common uses to which the appraisal put to:

1 Lease Negotiations: A property can see rise or fall in its value over time and if the owner or the manager wants to lease the property, an appraisal process may be required to correctly arrive at the right rentals. The appraisal may be a carried out on behalf of the owner or manager or even by the party that intends to take it on rent. Rentals are a function of the value of the property and if the owner or the manager does not know how much rent should be asked from the tenants because the value has gone up/down in his/her belief, then such a process becomes necessary.  Even the prospective tenant can have an appraisal process initiated if he/she thinks that the rent asked is too high.

2 Buying or Selling of the Property: An appraisal becomes almost necessary when the property is being bought or sold. The owner of the property can initiate the appraisal process when he/she wants to sell the property and must be able to quote the right price to the seller. The seller can also initiate the appraisal process if the price asked by the owner is too high. Sometimes, both the seller and buyer mutually decide to go for a professional appraisal during sale negotiation so that neither party is at a loss.

3 Government Acquisition: Sometimes the government acquires private property for public purposes and pays adequate compensation to the owner of the property thus acquired. When the government acquires such property, an appraisal process is initiated so to compensate the owner for the property. The appraisal is carried out by a professional company.

4 Tax Assessment: In certain conditions, the government collects taxes based on the value of the property. For the government to arrive at correct tax figures, an appraisal may be initiated. Such appraisal is usually initiated by the government.

5 Tax Appeals: If the government has served a tax demand on the owner of a commercial property which is too high in the eyes of the owner, then the owner can have an appraisal initiated and then appeal for lowering of the tax demand if the property value is not in consonance with tax demand.

6 Business Dissolution: Sometime a business sis dissolved owing to various reasons. There might be commercial property in the business, that is, the business entity to be wound up is the owner of the property. For the dissolution process to be completed, an appraisal of the property becomes necessary so that the business entity can arrive at its assets and liabilities figures correctly.

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