Appraisal Ordering & Pricing Information

 

Introduction

When ordering an appraisal, the main thing to keep in mind is that the price of the report will largely depend on the level of detail (report type) desired by the client, in addition to the property being appraised. The best way to understand pricing for your property is to submit a pricing request.

If the property is leased, it is important to understand that valuing one property interest over the other could affect the value conclusion (read below). For instance, appraising the leased fee estate interest would take into account the existing lease, while appraising the fee simple estate interest would typically not (if the income approach were developed it would be based on "market" terms, not "contract" terms).

Appraisal Pricing

Appraisal fees are based on the amount of time expected to complete the appraisal. For general appraisal pricing, please view our pricing page. Appraisal pricing is generally based on: (1) The report type; (2) The assignment type; (3) The subject property; (4) The valuation scenario(s).

Appraisal Report Types

The three most common report types are below.

All appraisals performed by our company are done on our own, proprietary, excel and word-based templates. This allows us to customize the analysis for unique properties and situations, as well as integrate the most meaningful data into the appraisal. It also results in an appraisal that has a better 'look and feel' than an appraisal completed on appraisal software, making it easier to read and understand.

All appraisals are “complete” appraisals and include a certification of value. The main differences are in the amount of details presented within the report.

In addition to the valuation of the property, appraisals are commonly used as reference points for the property at a given point in time. Keep in mind that with more/less details in the report, the appraisal will be more/less useful as a reference for the property and market.

Restricted Appraisal Report

A Restricted Appraisal Report contains an extremely limited amount of detail. This report is considered a limited report. As a result, it can legally only be relied on by one party, which is the client. It cannot be used for lending, or where more than one party must rely on the results of the appraisal. It is most appropriate if the user ordering the report is already familiar with the subject property and only wants a value.

Summary Appraisal Report

A Summary Appraisal Report contains a moderate amount of detail. This report is considered a summary of the subject property and appraisal process. Legally, it can be used for almost any situation. This report type offers a good balance of detail and price, though most commercial lenders will typically require a narrative appraisal report for lending.

Comprehensive Appraisal Report

A Comprehensive Appraisal Report contains an extensive amount of detail. This report is considered a comprehensive overview of the subject property and appraisal process. Most commercial lenders require a comprehensive (narrative) report for a loan and it is therefore considered to the standard for commercial lending. Comprehensive reports are most appropriate for lending, litigation, partnership dissolution, or when the users of the report desire a comprehensive view of the property and market.

Subject Property

Not all properties are equal when it comes to analyzing, understanding, and explaining the property. Properties that are unique or have several sections can take additional time to value and explain than a property that is very typical and only has one section. Conversely, larger properties can take more time to analyze than smaller properties. The location and subsequent availability of data can make some very small, straight forward properties have higher appraisal prices.

Valuation Scenarios

The amount and complexity of the valuation scenario(s) will also affect the price of the appraisal. For example, an appraisal of the "As is" Market Value for the fee simple estate (unencumbered property) interest on an existing 10,000 SF industrial building would typically be less expensive than an appraisal on the same property that also needs the Market Value of the leased fee estate (encumbered by the lease) interest and/or the "Prospective" Market Value after proposed improvements are made and/or the "Retrospective" Market value as of a previous date. It is important that you explain any atypical or additional appraisal needs besides current Market Value to the appraiser before proceeding with an appraisal to ensure that the scope of work will adequately meet your valuation needs. An overview of the most common value types and  scope of work are available in the value vaultIt is the client's responsibility to notify the appraiser, beforehand, of any additional valuation scenarios needed.

Fee Simple vs. Leased Fee Valuations

A valuation of the Fee Simple Estate interest typically disregards any existing leases and lease terms, unless the appraiser concludes that they are "at market" rates. If it is an income-producing property, income is typically based on market rates. A valuation of the Leased Fee Estate interest considers any/all existing leases and lease restrictions in-place. It can also consider proposed leases/lease terms, if applicable. If the existing income as a result of the leases are “at market”, the fee simple and leased fee values can be equivalent.

Fee Simple Valuations

If the property is not leased on a long-term basis, a valuation of at least the fee simple estate interest can be applicable. A fee simple valuation provides an opinion of property value as if it were unencumbered by any lease(s). Even if the property is fully leased, a fee simple value can help users understand the value of the property if the tenant(s) vacated for any reason.

Leased Fee Valuations

If the property is subject to an existing lease(s), the market value of the property may be different if taking into account the lease (leased fee) vs. disregarding the exiting lease (fee simple). This can be due to the existing lease rate(s) being above/below market levels, purchase options, other lease/use restrictions, etc. A leased fee valuation provides an opinion of property value as encumbered by the existing lease(s). Some property types sell only based on their leased fee values (typically mid and long term leases to credit tenants).

Fee Simple/Leased Fee Combination

If the property is leased for less than a few years to a non-credit tenant, most users would order an appraisal that considers the value of the property both subject to the existing lease(s), and unencumbered. This helps understand what the underlying asset value is if the lease were terminated or the tenant vacated for any reason. An exception would be if there is a lease that has a 5-10 year term or more, with renewal options, to a credit tenant. If the lease is very long term, for some property types, the most applicable value can be leased fee estate only.

Other Property Interests

The valuation of a building on a ground-lease would be based on the value of the "Leasehold Estate" interest, as would the value of a tenant's lease. There can be many other types of property interests to be appraised.

Hypothetical Conditions

A hypothetical condition within a real estate appraisal is a condition or factor that is presumed to exist on the property for the purpose of the valuation, but does not actually exist on the property as of the effective date of value. One example would be an appraisal made for a proposed building, wherein the “prospective” market value is based on the hypothetical condition that a building exists, when in fact the property is land only. Another example would be an appraisal that considers a building with a proposed lease, that, in addition to market value without the lease, the client wishes to know how the property value will change if the proposed lease is executed.

Appraisals can include none or several hypothetical conditions, dependent on the needs of the client. Hypothetical conditions can be useful alternative valuation scenarios to explore potential value changes based on one or several varying factors. They must be ordered by the client at the start of the appraisal. The appraiser is often not aware of hypothetical conditions or alternative valuation scenarios so they must be informed of them.

Valuation Dates

Unless otherwise indicated, the valuation date, or date of value in which the value is effective (effective date of value), is the date of the property inspection. This is referred to as a “current” valuation perspective. Appraisals can also have “retrospective” effective dates of value, which relates to the specific value as of a specific past date. Or, they can have “prospective” effective date of value, which relates to the specific value as of a specific future date. It is the client’s responsibility to inform the appraiser of any retrospective or prospective value needs.

Appraisal Scheduling & Estimated Delivery Date

Read about our appraisal scheduling and ordering policies.