Financing in 13820>Question Details

sirduke07, Home Owner in Oneonta, NY

can a appraisal on commercial property be appealed?

Asked by sirduke07, Oneonta, NY Tue Jun 4, 2013

We had our comercial property appraised in 2007 and it appraised at $800,000 at the time of that appraisal we were during construction on an additional 5,000 sq ft. bldg. we are seeking refinancing for a lower interest rate and the appraisal came back at $375,000 which was below the banks 75% loan to value rate. This has cost us considerable time and money, and we believe there has to be some error in the comps (the property is a 4 large building complex w/three bldgs over 5,000 sq. ft. and in excellent shape) Is there any way to appeal and if so what are the procedures?

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There are three approaches to determination of property value: the cost approach, the market sales comparison approach, , and the income approach. These approaches are based on three aspects of value:

The value indicated by recent sales of comparable properties in the market, with adjustments for age, condition, and other characteristics

The cost of reproducing or replacing a property minus accrued depreciation

The investment value represented by the net earning power of a property based on the capitalization of the income stream.

Generally accepted procedure is to utilize as many of the three industry accepted approaches as possible in an appraisal. Choose the most appropriate as the principle method for the specific appraisal situation, and apply the other valuation approaches to support the final value estimate.

There are situations where only one or two approaches may be used. For instance, an owner-occupied residential property is not likely to produce rental income that could be capitalized into an estimate of value through use of the income approach. So, the sales comparison or cost approaches might be more appropriate. Vacant land has no cost of improvements, so the cost approach would not be an appropriate method for that situation.

Specialized properties do not typically change hands enough to generate comparative sales, so the cost or the income approach might be more appropriate in your case.
0 votes Thank Flag Link Wed Jun 5, 2013
There is a comparable business that is on the same street and in the same condition and size that appraised for less than ours in 2007 that sold recently for 350,000 and our property has an additional two buildings of the same size as the main building one of these buildings is under lease by the same company that has been leasing it for 10 years the other is a K-12 private school and the fourth building is a commercial style dining hall.
0 votes Thank Flag Link Wed Jun 5, 2013
They created different methods for Appraising Commercial property for very good reasons:
Can a Mom-n-Pop grocery store be compared to a high rise office building?
In addition, Commercial property is more sensative to the Local Ecconomic Climate, with wide value swings.
You might look at your Business Plan and another Lender.
0 votes Thank Flag Link Wed Jun 5, 2013
There are also different/other approaches to value other than the market approach. Please consider discussing this with an appraiser.
0 votes Thank Flag Link Wed Jun 5, 2013
Were both appraisals done by the same company? For the same purpose? Any appraisal can be disputed. It is an opinion of value based on recent comparable sales.
0 votes Thank Flag Link Wed Jun 5, 2013
There is a comparable business that is on the same street and in the same condition and size that appraised for less than ours in 2007 that sold recently for 350,000 and our property has an additional two buildings of the same size as the main building one of these buildings is under lease by the same company that has been leasing it for 10 years the other is a K-12 private school and the fourth building is a commercial style dining hall.
Flag Wed Jun 5, 2013
There is a comparable business that is on the same street and in the same condition and size that appraised for less than ours in 2007 that sold recently for 350,000 and our property has an additional two buildings of the same size as the main building one of these buildings is under lease by the same company that has been leasing it for 10 years the other is a K-12 private school and the fourth building is a commercial style dining hall.
Flag Wed Jun 5, 2013
No, they were done by two seperate companies for the same purpose but six years apart
Flag Wed Jun 5, 2013
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