As noted in our previous article, there are several ways for real estate professionals to value commercial property.
You can use the sales comp approach or the cost approach, or maybe you’d prefer to use rents to justify using the income or gross rent multiplier approaches. There are certainly scenarios where it makes sense to use multiple approaches to reach a final valuation.
No matter which approach an appraiser uses to value commercial real estate, the fact of the matter is this: the valuation is only as accurate as the information used as inputs to the analysis.
Fortunately, the market for commercial real estate appraisal software has exploded in recent years. Dozens of tools exist to help make valuing commercial property easier and more accurate than ever.
In this article:
Commercial Real Estate Appraisal Software
Commercial real estate appraisers have a duty to provide the most accurate, unbiased appraisal based on comparable and specific market data.
Their opinion of value plays a critical role in determining everything from the final purchase price to a person’s ability to get financing.
It’s so critical for an appraiser to have access to high-quality data to comb through old reports, recent market statistics, local comps, rent rolls and more to justify the valuation of a property.
An appraiser must always be prepared to defend a valuation if ever brought to court, even in assignments where litigation seems unlikely.
Appraisers are also expected to adhere strictly to the Uniform Standards of Professional Appraisal Practice, which, among other things, requires them to provide an unbiased opinion of value. Failure to follow this code could result in disciplinary action from the state, including loss of their appraiser’s license.
In other words: it’s not just the property that’s under a microscope. The commercial real estate appraiser is, too.
And that’s where commercial appraisal software comes in handy.
The Best Commercial Real Estate Appraisal Software
The software applications out there today help appraisers pull market data, analyze comps, and generate different types of reports. Below is a list of the top commercial property appraisal applications on the market today.
By simply searching for a known property, or by identifying new target properties, you can use Reonomy Comps to quickly access a long list of comps on any commercial asset nationwide.
You can search Reonomy for properties by location, asset type, building and lot characteristics, sales history, debt history, and owner details.
Once you have found a commercial property of interest, enter the profile page of that property and click the “View Comparables” icon.
Once you do that, you’ll be brought to a new list of properties, similar to the list you started within your original search. There, you can simply scroll through, select, and analyze the properties of your liking.
On the profile page of your subject property and comparable properties, you’ll be able to see the assessed and market values for the most recent tax year.
You can also see the sales history and building and lot characteristics of those properties—from the most recent sale date, to most recent sale price, to building and lot size and age.
This information can be used to compare any subject commercial asset to very recently sold comparable properties to better understand its current market value.
PropertyMetrics is a great tool for commercial real estate appraisers who need assistance creating pro formas and other detailed financial models.
These financials are used as inputs into the income or discounted cash flow appraisal models. PropertyMetrics gives you information about cap rates, IRR and NPV.
The software can also help create real estate equity waterfall models. PropertyMetrics combines its cloud-based tools with multiple online courses that help explain the logic behind these financial models. Collectively, these tools help an appraiser create presentation-quality financial reports while being able to intelligently defend the numbers on the page.
Datappraise bills itself as an all-in-one commercial real estate appraisal software that allows appraisers to both mine property information and generate appraisal reports.
One thing that’s unique about Datappraise is that the software is meant to be used across team members. For instance, you don’t need to be an appraiser to use the software.
Instead, appraisers can have their analysts or others in the office input information into the Datappraise system to help the appraisers stay organized and on track. All fields are clearly labeled and there are tutorials to help those who are less familiar with the nuances of valuation. After all of the inputs are complete, Datappraise generates reports through Microsoft Word and Excel, which most people have at least some familiarity with compared to customized appraisal software applications.
After comps and other data have been collected and input into a software system, one of the only things left to do is generate a final report for the client. This is where ReportBuilder PRO comes in handy.
See, many people don’t realize that there are different kinds of appraisal reports. Pre-reports are a great example.
There are actually three different types of pre-reports: “restructure use reports” are the shortest and least detailed, and as a result, can only be used by the client who hired the appraiser.
A “summary report” includes a summary of all data and information collected by the appraiser and can be used by any recipient.
Finally, a “self-contained report” is more arduous to complete because it uses several valuation methods, but it is the most comprehensive of the commercial real estate appraisal pre-reports.
As an appraiser, creating reports from scratch can take hours. ReportBuilder PRO helps guide appraisers, no matter which type of report is being created. Once certain inputs have been created, the software creates standardized reports that include the most important information relative to that specific assignment. It helps produce grids and summary tables that can then be tweaked by the appraiser as necessary.
ValueLink offers several features not seen with the other commercial real estate appraisal software we’ve looked at.
For instance, it provides order management by sending automatic email notifications when tasks are becoming due. There’s an administrative dashboard that provides a high-level look at all open orders for a company that goes beyond one individual appraiser’s workload. Having this information makes it easier for administrators to assign orders and other tasks to team members. Once an order is complete, all accounts and billing can be managed through the software as well.
What makes appraisal software “good”?
So, which software is best for you? Well, there are a few key features to look for when vetting various applications to figure out which software you should be backing yourself with.
The key features of “good” appraisal software are high-quality data, relevance to your needs, ease-of-use, and accessibility.
Quality of Data
Appraisers will want to know where the company sources its data. Are the sources valid? How does it gather data in markets with limited data or few comps? Does the software rely on publicly-accessible information only, or do they have means of collecting more detailed, private information – and how? Equally important is understanding how often this information is updated.
When in doubt, take a set of information you know to be true and look for that information in the database to cross-reference it. Was the information generated by the software accurate? This is a good way to be sure. The real estate market is constantly evolving. Having access to updated, high-quality data is essential for any appraiser.
Responsiveness to Need
It would be a fool’s errand to adopt a new commercial real estate appraisal software just for the sake of using the “latest and greatest” technology.
Instead, appraisers should step back and really consider what it is that they’re looking for software to help them do. Various platforms offer various tools – be sure to find software that is responsive to your specific needs. For instance, if you enjoy writing appraisal reports, you probably don’t need to invest in a commercial appraisal software that generates reports for you.
Ease of Use
Commercial appraisal software will only be helpful if it makes your day-to-day life easier. That means the software needs to be highly intuitive and easy to navigate. Most companies will offer a free trial.
Take advantage of it in order to play around with the software and see how you’ll be interacting with it.
Some commercial real estate software applications are more detailed than others, which is great – in theory – unless they are so detailed that it requires intensive training before use. Most appraisers don’t have the time or energy for software that has a steep learning curve.
We’re a big proponent of using software that harnesses cloud-based technology. Commercial real estate appraisers need to know that their information is securely stored in the event of some catastrophic event like theft, fire, flood or servers that crash.
Appraisals are often time-sensitive and need to be delivered to a client by a certain date. Having instant access to property value information and recoverable files ensures that an appraiser can continue to operate on-demand and without interruption.
The Outlook for Appraisal
There have been some people in the commercial real estate industry who have speculated that appraisals will eventually be entirely automated.
While commercial real estate appraisal software is extremely helpful, for the time-being, it cannot take the place of the real-world experience that appraisers bring to the table.
Instead, commercial appraisal software should be thought of as a resource, or as something that takes your expertise to entirely new, more efficient levels.
Software can help streamline processes in order to free up time that can be spent tracking down and pitching new business, helping appraisers save time while boosting their bottom line.