When buying real estate, be wary of these appraisal challenges.

On Behalf of | Apr 23, 2024 | Commercial Litigation

An appraisal gives an unbiased estimate of a property’s market value. This key estimate factors into many aspects of property transactions, from selling to financing. It’s just as important when buying commercial real estate. But sometimes, the appraisal process might not go as smoothly as you’d like.

You might face challenges finding comparable properties, securing enough financing or dealing with a changing market.

Finding comparable properties

Commercial properties, such as office spaces, retail stores, or industrial sites, are often quite different from residential real estate. Their unique features can make it difficult for the appraiser to find similar properties for comparison. This could lead to a value that you, the buyer, might dispute.

Limited financing options

Banks usually lend based on the lower of two values: the appraised value or your agreed purchase price. If the appraised value is lower than the price you’ve agreed on, you might have to cover the difference. This could be a problem, especially if you were planning to limit your upfront payment.

Market volatility

Real estate markets can change rapidly. If the market shifts between when you agreed on the purchase price and when the appraisal takes place, the property’s value might change. This could disrupt your plans, primarily if you were relying on a certain value to secure financing or plan future investments.

When legal help becomes necessary

When these appraisal challenges become too complex or the financial stakes are high, it may be necessary to seek assistance. In Texas, real estate laws can be complex. A legal professional can be beneficial in situations like this. They can help challenge the appraisal, negotiate with lenders or sellers or even guide you through litigation if necessary.

Buying commercial real estate is a huge decision. If you’re serious about it, you need to understand that the path might not always be smooth. Appraisal challenges can be part of the journey. However, with the proper preparation and a clear understanding of potential hurdles, you can navigate this complex landscape more effectively as a business owner.