What is the main difference between a residential appraisal and a commercial appraisal?

The main difference between a residential appraisal and a commercial appraisal lies in the types of properties they evaluate. Residential appraisals are specifically focused on properties that are used for dwelling purposes, such as single-family homes, condominiums, and multi-family units with up to four units. The primary goal is to determine the value of these living properties based on factors like comparable sales, condition, and location.

In contrast, commercial appraisals target income-generating properties, such as office buildings, retail spaces, warehouses, and other real estate that is used for business purposes. The appraisal process for commercial properties often involves more complex financial analyses, as it takes into account factors such as potential income, expenses, and market demand.

Understanding this distinction is crucial for appraisers, as it informs the methodologies they will employ based on the property type they are evaluating. While residential appraisals might rely heavily on sales comparison, commercial appraisals might also utilize income capitalization and cost approaches to arrive at a value that reflects the property's potential to generate income.