August 5, 2025 • General
If you’re getting ready to buy, sell, or refinance a commercial property, chances are you’ll need an appraisal. It’s a critical piece of the puzzle—whether you’re trying to secure a loan, determine a fair purchase price, or evaluate a building’s long-term investment potential. But commercial appraisals can be dense, and knowing what to look for can save you time, money, and a few headaches.
Here’s a breakdown of what actually matters when reviewing a commercial real estate appraisal:
1. Who Did the Appraisal?
Start by looking at who completed the appraisal. Are they licensed? Do they have experience in your market? For commercial properties, it helps if the appraiser has worked with similar property types (office, retail, industrial, etc.). An appraiser who knows the local market—especially Amarillo or the surrounding areas—is going to give you a much clearer picture of value.
2. Why Was It Done?
Every appraisal has a purpose. Sometimes it’s done for lending, sometimes for buying, selling, or even for tax reasons. That purpose determines the depth and focus of the report, so make sure it matches your goals.
3. How Was the Value Calculated?
Most commercial appraisals include one or more of these approaches:
- Sales Comparison: Compares your property to similar ones recently sold.
- Income Approach: Estimates value based on how much income the property generates.
- Cost Approach: Looks at what it would cost to rebuild the property from scratch, minus depreciation.
For income-producing buildings, the income approach usually carries the most weight. If it’s a vacant building or one needing work, the cost approach might be more relevant.
4. Does It Match Market Conditions?
A good appraisal reflects what’s happening now—not just past data. It should include current market rents, cap rates, vacancy rates, and even economic trends that might affect the property’s value in the near future.
5. Are the Numbers Realistic?
If the property brings in rent, you’ll want to pay close attention to the rent roll and expense breakdown. Does the appraisal assume market rents that seem high? Are expenses too low? These projections affect the net operating income (NOI) and, in turn, the final value.
6. What About Zoning and Legal Issues?
The appraisal should cover zoning, property use, and any red flags—like encroachments, easements, or environmental issues. If there are risks, you want to know about them before you move forward.
7. What Condition Is the Property In?
Photos, notes on the building’s condition, and any deferred maintenance should be included. If the roof needs replacing or HVAC is on its last leg, that impacts value.
8. The Final Number—How Did They Get There?
Finally, look at how the appraiser landed on their final value. Do they explain which method they relied on most? Is the reasoning clear? If something feels off or vague, don’t be afraid to ask questions.
Why It Matters
Appraisals aren’t just paperwork—they influence lending terms, insurance, negotiation, and investment strategy. Whether you’re an owner, investor, or broker, understanding how to read one gives you a serious advantage.
Need Help Navigating an Appraisal?
At Wellborn Real Estate, we help clients across Amarillo and the surrounding area break down the numbers and make sense of what it all means. If you need an appraisal, are reviewing one, or just want a second opinion, give us a call—we’re here to help.