When we list a business for sale that will include the commercial real estate as part of the assets of the sale or it will be available for the buyer to purchase, we always suggest that the seller have the property appraised by a licensed professional commercial real estate appraiser before we go to market. This will cost the seller a few thousand dollars up front (cost varies depending on the scope of the project and the property itself); however, the benefits to the marketing and eventual sale will be completely worth it in the end, and here’s why we believe that to be true.
Get Exact Market Value
Business brokers are not licensed appraisers. Neither are commercial real estate agents. While we are allowed to give our opinion of value on a piece of commercial real estate, we are not experts when it comes to appraising the exact value of the property. That’s why banks require a professional appraisal before they are willing to lend on the property. They want to know exactly how much it’s worth in today’s market. So, knowing how much the commercial real estate is worth up front, when we are listing the business for sale is the best time to have it appraised by a professional.
Pricing commercial real estate is not like pricing a home. Every property is vastly different, and comparable sales in the surrounding areas can be hard to find. That’s why getting a professional appraisal is so beneficial. We know right from the start what the real estate is worth, and it takes all of the guesswork, negotiations with buyers, and uncertainty of whether or not the lender’s appraisal will match the value on the purchase contract out of the equation. It will make the sale much quicker and smoother in the end.
Buyers Agree the Value
When we have a professional appraisal in hand on a piece of commercial property that is being sold with a business, and the seller has agreed to share the appraisal with potential buyers, there is no question in the buyer’s mind as to if the property is worth the value listed. In addition to knowing what the value of the property is when listing the business, providing an appraisal to the buyer really makes it clear what the real estate is worth. Normally buyers don’t even try to negotiate on the price of the real estate simply because all parties agree the number that’s listed in the appraisal. It makes allocating the value of the real estate very easy and there is never even a question from the buyer about it, as a professional appraisal is normally just accepted as market value.
It’s a Selling Point
Being able to share the real estate appraisal with potential buyers is a great selling point. It puts buyers at ease with the valuation of the property and then they can focus on other parts of the business purchase. It is also a great confidence booster if the buyer is borrowing. A lender is going to order another appraisal as part of the loan process; however, there won’t be the normal worry of whether or not the property will appraise at the contract value. While opinions of appraisers can vary somewhat, the appraisal process is actually very scientific and mathematical, and they will most likely be using the same comparable sold properties, so we really would expect the two appraisals to come out around the same value, resulting in a smoother loan approval process.