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Commercial Vs Residential

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Berndiz

Freshman Member
Joined
Feb 7, 2017
Professional Status
General Public
State
Minnesota
Hi there.

I am looking at buying a house from a family friend. He had it appraised and the person that appraised it appraised it as commercial land. He has multiple acres there where he is only selling 2.5 acres with the house. The land next to it is being sold as commercial. I am wondering if the 2.5 acres with the house should be appraised as residential instead of commercial? Also if there is a difference in price if appraised as commercial vs residental.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I am wondering if the 2.5 acres with the house should be appraised as residential instead of commercial?
We don't really have enough information to make our own determination, but from your description, it sounds like the appraiser made the determination that the highest and best use is for commercial use, rather than residential. In essence, the appraiser felt that the property is more valuable as a commercial tract of land than for continued residential use.
 

Mark K

Elite Member
Joined
Jan 27, 2004
Professional Status
Certified Residential Appraiser
State
Indiana
Knowing nothing more than what you've presented...

It is quite possible that 2.5 acres of commercial land is more valuable than residential use of the same 2.5 ac. with a house.

As a matter of fact, the house may be in the way and needs to be removed to fully realize the commercial potential of the land.

It comes down to what appraisers call Highest and Best Use of the property.
 

Berndiz

Freshman Member
Joined
Feb 7, 2017
Professional Status
General Public
State
Minnesota
We don't really have enough information to make our own determination, but from your description, it sounds like the appraiser made the determination that the highest and best use is for commercial use, rather than residential. In essence, the appraiser felt that the property is more valuable as a commercial tract of land than for continued residential use.

The guy has 15 acres all together out of the 15 acres he is selling 2.5 acres that has a house and a garage on it with that being said the appraiser put it as commercial why would that be when no profit can be made off of it. Should it be still considered commercial
 

Cob

Senior Member
Joined
Mar 30, 2006
Professional Status
Certified Residential Appraiser
State
Texas
You should really be asking your lender or whoever you will get a possible loan with for the purchase of this property, if you are in fact getting a loan to finance the property, asking a bunch of random appraisers on here probably won't get the answer you are looking for, we also do not know what the intended use of the previous appraisal on the property was. I would also ask this family friend that you may buy the property from a LOT of questions, since he is the owner, he has more information than anyone.
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
If it was appraised as a commercial property then it was most likely not on a form. There should be a section in the report called Highest and Best Use which should answer many of your questions.
 

techbiker

Sophomore Member
Joined
Dec 4, 2015
Professional Status
General Public
State
Texas
Hi there.

I am looking at buying a house from a family friend. He had it appraised and the person that appraised it appraised it as commercial land. He has multiple acres there where he is only selling 2.5 acres with the house. The land next to it is being sold as commercial. I am wondering if the 2.5 acres with the house should be appraised as residential instead of commercial? Also if there is a difference in price if appraised as commercial vs residental.

Does the 2.5 acres have significant road frontage on a busy thoroughfare? Is the 2.5 acres at an intersection? Is development approaching this agricultural land?

Where does the adjacent "commercial" property sit on the road relative to the 2.5 acre parcel? Closer or farther away from an intersection? Have you researched the city's future development plans? Is this area set to be zoned commercial or residential? Or is the property in an unincorporated area?

If you spend enough time searching for commercial properties, you can get pretty good as guessing whether a parcel would make for a good commercial location. Generally, the greater the traffic exposure, the "better" the location is for commercial uses and the "poorer" it is for residential. And visa versa.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
the appraiser put it as commercial why would that be when no profit can be made off of it. Should it be still considered commercial
I presume that you are referring to interim income, such as renting the house vs renting the site? If so, that might be correct, but the market value as a commercial site should be higher than the market value based on continued residential use, which would hence dictate it being appraised for commercial.
 
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