What Exactly Does The Term “Value” Mean?

The “value” of an item is defined by the usefulness, worth or importance that a person, or an organization places on it. Almost always, this definition equates to the amount of money someone is willing to trade in order to acquire it.

This phenomenon applies to many different things such as, automobiles, art, jewelry, boats and even the talents of a professional athlete. In our world, it most often applies to homes, buildings and land, and can occur as a result of both tangible and intangible factors.

Since we deal with real property, our job is to both recognize and maximize the potential of the intangible factors when they are present and change them to the benefit of our clients when we can. The ultimate “value” of a piece of real estate also depends heavily on being equipped to “read the tea leaves” when deep in negotiation.

In the simplest terms, we’ll work to find every way possible way to improve the desirability of a client’s property and to have it be perceived as the best available, no matter what price level it occupies. Whether the satisfaction of ownership would come in the form of pure enjoyment or due to the ability of the property to outperform others in the generation of wealth, we are always working to be the best equipped to recognize and maximize a property’s potential for our clients.

Residential vs Commercial Valuation

In the U.S., the process used to arrive at the estimate of value of a residential property is relatively straight forward. All licensed and certified residential appraisers use the Uniform Standards of Professional Appraisal Practice to select and compare the sales of properties that are most similar to the subject property. These recent sales are compared to the subject property using a series of adjustments, both positive and negative, and are made to each sale in an effort to reach an objective estimate of value.

Due to past experience gathered as a State Licensed Appraiser, we understand the residential appraisal process and are able to identify comparable sales that work within the framework of these standards. In periods of rapid market change, this skill set is a tremendous advantage to both our seller and buyer clients, as the supporting information we are able to provide to an appraiser assigned to our transaction is specific, detailed and developed using appraisal guidelines and solid rationale.

Since appraisers have multiple assignments at once, they rarely have the time available to do the deep dive research we perform on every property we represent, so the data provided to them is almost always useful and welcome.

Commercial property is exactly what the name suggests. These properties are used in the course of business and for the purpose of building wealth through increased equity, cash flow, appreciation and expansion. The value of these properties are further enhanced by the use of federal, state and local government incentive packages, such as enterprise or opportunity zones, tax incremental financing and economics development contributions designed to offset certain soft and hard construction costs in targeted areas.

Commercial asset classes include industrial, multi-family, retail, and office uses and are valued through a completely different set of tools. These tools include the Sales Comparison, Cost and Income Capitalization approaches, as well as the Cost Per Door and Cost Per Rentable Square Foot analysis, just to name a few.

Our purpose in explaining commercial valuation is to make these observations. First, it takes only a brief second to realize that these property assets will become complicated right out of the gate. It is also the reason why commercial real estate practitioners specialize in their chosen area of expertise.

For this reason, any role we play in supporting our fiduciary, family or individual clients in the need to market and sell a commercial property, is undertaken in partnership with an experienced commercial practitioner that we know and trust. It must also be a practitioner who specialize in the asset class that we are tasked with liquidating. Working with other professionals we know allows us to be consistent in the personal service and communication we provide to our clients, while also insuring that they receive the highest quality advice and service possible.