Hiring a Professional Appraiser vs. Using Automated Valuation Tools for Commercial Property Valuations

 

When assessing the value of commercial real estate, two options are hiring a professional appraiser or utilizing automated valuation tools. Here are some key factors to consider when deciding between the two approaches. 

Human Expertise
Professional appraisers leverage extensive real estate valuation experience. They have in-depth knowledge of local market conditions and commercial property types. Appraisers can account for unique property characteristics and trends. They also inspect properties in person. This human expertise allows appraisers to provide accurate, customized valuations. Automated tools lack local market insights and property inspection capability.

Customized Analysis
Experienced commercial appraisers tailor their analysis to each assignment. They select the most applicable valuation methodologies and comps. Appraisers can justify all adjustments made. This customized analysis results in valuation reports with thorough explanation of the determination. Automated tools use more generic algorithms and have limited adjustment abilities.

Market Condition Considerations
Appraisers keep up with the nuances of micro and macro market shifts. They can factor recent developments like new zoning policies or rising interest rates into valuations. Automated tools rely on historical data and may be slower to account for market changes.

Risk Assessment
In addition to determining value, appraisers assess property condition and identify potential risks like outdated systems, structural issues, environmental concerns etc. This risk analysis is based on in-person inspection. Most automated tools do not incorporate risk assessment.

Credibility
Appraisers must be state-licensed and follow professional standards. This provides credibility versus automated tools which can be created by anyone. However, some automated tools are powered by leading industry data.

Objectivity
Commercial appraisers offer independent, unbiased opinions of value adhering to ethics rules. Automated valuations are objective, but some tools allow input manipulation to hit desired values.

Cost
Hiring an appraiser cost more but provides customized analysis. Automated tools are more budget-friendly yet offer less flexibility. Simpler commercial assets need less custom analysis so automated valuations may suffice in those cases.

Turnaround Time
Automated valuations are instant while appraiser reports take weeks due to inspection scheduling and rigorous analysis. Quicker turnaround can be beneficial in some situations.
 

In summary, professional appraisers provide highly customized analysis based on property inspection and local expertise. Automated tools offer speed and affordability but lack customization. For complex commercial assets or volatile markets, human appraisers remain the gold standard.