How does the appraisal work on a commercial loan?
A commercial real estate appraisal is ordered by the lender after your application is submitted, typically completed in 2 to 5 weeks depending on property type and complexity, costing $1,500 for a simple small property to $6,000 or more for a complex commercial asset. The appraiser combines the sales comparison, income capitalization, and sometimes cost approaches into 1 final opinion of value, which the lender uses to size your loan.
The process, step by step
- Order. The lender orders the appraisal, usually through an appraisal management company for residential-style properties or directly with a commercial appraiser for larger commercial deals.
- Scheduling. The appraiser contacts you or the seller to schedule an inspection, typically within 1 to 2 weeks of the order.
- Inspection. The appraiser physically inspects the property, measures it, and photographs interior and exterior condition.
- Analysis. The appraiser researches comparable sales, rental rates, and, for income property, builds an income capitalization analysis.
- Report. A written report combining the approaches into 1 opinion of value is delivered to the lender, typically 2 to 4 weeks after the inspection.
The 3 approaches to value
| Approach | How it works | When it is weighted most heavily |
|---|---|---|
| Sales comparison | Recent sales of similar properties, adjusted for differences | Owner-occupied and smaller properties |
| Income capitalization | Net operating income divided by a market capitalization rate | Income-producing property like multifamily, retail, office |
| Cost | Replacement cost minus depreciation, plus land value | New construction, special-purpose property |
Cost and timeline by property type
| Property type | Typical cost | Typical timeline |
|---|---|---|
| 1 to 4 unit residential (DSCR) | $500 to $1,200 | 1 to 2 weeks |
| Small commercial or mixed-use | $1,500 to $3,000 | 2 to 3 weeks |
| Multifamily 5+ units | $2,500 to $6,000 | 3 to 5 weeks |
| Specialty (hotel, self storage, etc.) | $4,000 to $10,000+ | 4 to 8 weeks |
What supports a stronger appraisal
- A detailed rent roll and current leases, provided before the inspection.
- Comparable sales you have researched yourself, especially for unusual property types.
- Documentation of any recent capital improvements with receipts.
- A clear scope of work if the property is being renovated or built.
Who pays and when
You typically pay for the appraisal upfront as a deposit once you accept a term sheet, before the lender orders it. This cost is generally non-refundable regardless of whether the deal closes.
If the appraisal comes in low
See the dedicated answer on what to do if your refinance appraisal comes in low; the same reconsideration process applies to purchase-money appraisals.
How CommFi handles it
Our lending desk assembles the rent roll, leases, and improvement documentation before the appraisal is ordered, so the appraiser has the strongest possible file from day one. It funds direct when it fits, and when the desk searches a database of 7,000+ lenders, each one's appraisal process and typical timeline is factored into your overall closing schedule. Zero upfront fees.
Related reading
Related questions
- How long does a commercial appraisal take?
- Typically 2 to 5 weeks from order to final report, depending on property type and complexity.
- How much does a commercial appraisal cost?
- $1,500 for a simple small property to $6,000 or more for a complex commercial asset, and higher still for specialty properties.
- What are the 3 approaches to commercial property value?
- Sales comparison, income capitalization, and cost approach, combined into 1 final opinion of value weighted based on property type.
- Who pays for the commercial appraisal?
- Typically you, as a deposit paid once you accept a term sheet, before the appraisal is ordered. It is generally non-refundable.
- What can I do if the commercial appraisal comes in low?
- Request a reconsideration of value with additional comparable sales and documentation, similar to the process for a low refinance appraisal.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.