Of course, a modern property owner also faces mandatory appraisal of their property, but there are a number of cases when an appraisal of commercial real estate as a whole becomes necessary.
Sometimes, the value of income-generating real estate is quite obvious to both owners and potential investors, but it is the independent accurate appraisal that can significantly change the value of the property. When might an independent real estate appraisal be needed? In the following cases:
- alienation or leasing;
- mortgage lending against real estate;
- contributing income-generating property as a contribution to the charter capital;
- revaluation of fixed assets;
- placing unaccounted objects on the balance sheet;
- resolving property disputes;
- determining the amount of damage, assessment of damage from flooding, fire;
- other transactions related to the exercise of property rights to commercial real estate objects.
Valuation of income-generating real estate can be performed using the following three approaches: comparative, cost, and income. The comparative approach involves using the sales comparison method, which is based on the principle of substitution. In other words, the method is based on the assumption that a buyer will not pay more for a property offered for sale than the amount sufficient to purchase a property of similar quality and utility.
The income approach is characterized by the idea that the value of an income-generating real estate property directly depends on how possible it is to obtain the income derived by the owner from owning the property.
The cost approach, on the other hand, is based on the principle of substitution. This principle implies that an investor will not pay more for a real estate property than the amount sufficient to construct, without significant delay, a property of similar quality and purpose.
Upon completion of the valuation of income-generating property, the property owner receives a summary of the results of the valuation methods. Independent appraisal should be carried out by specialists who are well-versed in the real estate market, its main trends, objects, and concepts.