Broker Opinion of Value for Refinancing Commercial Property
Before a lender will refinance your commercial property, they need to know what it’s worth. Before you commit to a refinance, you need to know the same thing. A broker opinion of value gives you a fast, market-grounded picture of your property’s current value so you can evaluate your equity position, approach lenders with realistic expectations, and make informed decisions about whether and how to refinance.
A BOV is not a certified appraisal and cannot substitute for one when a lender requires USPAP-compliant documentation for underwriting. But as a planning tool, a pre-refinance BOV is one of the most cost-effective things a commercial property owner can do before engaging a lender, a broker, or a debt advisor. It costs far less than a formal appraisal and delivers in days rather than weeks.
Why Owners Request a BOV Before Refinancing
Refinancing a commercial property involves more variables than residential refinancing, and getting any one of them wrong can mean the deal doesn’t close or closes on terms that don’t serve your interests. Here is why a BOV before refinancing makes sense:
Know Your Equity Position Before You Approach a Lender
Commercial lenders set their loan amounts based on loan-to-value ratios, typically 65% to 75% of appraised value for most property types. If your property is worth $5 million, the lender will loan approximately $3.25 million to $3.75 million. If you are carrying $4 million in existing debt, the refinance may not pencil at all. A BOV tells you what your property is worth before you spend time on lender conversations, application fees, or a full appraisal only to discover the numbers don’t work.
Evaluate Whether the Refinance Makes Financial Sense
A refinance that makes sense at one property value may not make sense at another. If values in your submarket have declined since your last refinance, the new loan may be smaller than your existing debt, leaving you with a gap to fill at closing. If values have appreciated significantly, a cash-out refinance may unlock equity for reinvestment. You cannot evaluate either scenario accurately without a current valuation.
Support a Lender’s Value Estimate Before the Appraisal Is Ordered
Lenders will order their own certified appraisal as part of the underwriting process, and that appraisal is what the loan is ultimately based on. But a BOV done before the appraisal is ordered gives you a professional, market-based reference point. If the lender’s appraiser comes in significantly lower than the BOV, you have a documented basis to discuss the discrepancy, request a reconsideration of value, or identify whether the appraiser used inappropriate comparables.
SBA Loan Support
SBA 7(a) and SBA 504 loans for commercial property require a certified appraisal for most loan amounts. However, a BOV is useful before the SBA process begins to confirm that the property value will support the loan amount requested and to identify any valuation issues that should be addressed before an appraiser is engaged.
Debt Restructure and Maturity Wall Planning
A significant volume of commercial real estate debt originated in 2020 to 2022 is maturing in 2025 and 2026. Many of these loans were underwritten when values were at or near peak, and they are maturing into a market where values in some asset classes have declined materially. Owners facing maturity need to know whether their property’s current value supports refinancing at sufficient levels to pay off the existing debt, or whether they face a gap that requires additional equity, a loan modification, or other restructuring. A BOV is the most practical starting point for that analysis.
When a BOV Is Sufficient vs. When You Need a Certified Appraisal for Refinancing
| Situation | BOV Appropriate | Certified Appraisal Required |
|---|---|---|
| Pre-refinance planning and equity analysis | Yes | No |
| Evaluating whether refinance makes financial sense | Yes | No |
| Lender underwriting (conventional loan) | No | Yes |
| SBA 7(a) or 504 loan underwriting | No | Yes (above de minimis thresholds) |
| CMBS or institutional lending | No | Yes |
| Reconsideration of value after low appraisal | Supporting document | Primary document |
| Debt maturity planning and restructure analysis | Yes | Depends on lender requirements |
How Commercial Property Value Is Assessed for Refinancing
Lenders and their appraisers evaluate commercial property value using the income approach for income-producing properties and the sales comparison approach as a reality check. The key variables that most directly affect your refinancing outcome are:
- Net operating income. Your property’s income after operating expenses drives income-approach value. Vacancy, below-market rents, or elevated expenses all suppress NOI and therefore suppress value and loan capacity.
- Cap rate. The capitalization rate the market is applying to your property type in your submarket directly determines your income-approach value. Cap rates have risen significantly in many markets since 2022, which means the same NOI produces a meaningfully lower value than it did two or three years ago.
- Comparable sales. Recent sales of similar properties in your submarket provide the market evidence check on income-approach value. If comparable sales support a lower value than the income approach, lenders typically use the lower number.
- Physical condition. Deferred maintenance, roof condition, HVAC, structural issues, and ADA compliance are all factored in. Properties with significant deferred maintenance are valued lower and sometimes face additional lender reserves or holdbacks.
- Lease structure. Long-term leases with creditworthy tenants improve a lender’s perception of income stability. Short remaining lease terms or month-to-month tenancies increase perceived risk and may limit loan proceeds.
Request a BOV Before Your Refinancing
Know your equity position and your refinancing options before you engage a lender. Submit your property details and a licensed commercial real estate broker will review your request and follow up promptly.
Frequently Asked Questions
Can a BOV replace a certified appraisal for a commercial refinance?
No. Commercial lenders require a USPAP-compliant certified appraisal from a licensed MAI appraiser for underwriting. A BOV is a planning tool, not a lending instrument. It is appropriate for evaluating your equity position, determining whether a refinance makes financial sense, and identifying potential value issues before the appraisal is ordered.
What is a typical LTV ratio for commercial property refinancing?
Most conventional commercial lenders will loan 65% to 75% of appraised value, depending on the property type, the borrower’s credit profile, and the lender’s current appetite for the asset class. Knowing your property’s current value from a BOV tells you what loan amount is likely achievable before you engage lenders.
My property was appraised for refinancing two years ago. Is that still relevant?
Likely not at full accuracy. Commercial real estate values have shifted materially in the last two to three years due to interest rate increases and changing demand patterns. A current BOV gives you an updated market-based picture before you commit to a refinancing strategy based on a stale number.
What happens if the appraisal comes in lower than the BOV?
A gap between a BOV and a formal appraisal is not uncommon. If the appraisal comes in lower than expected and you believe it is not supported by current market evidence, you can request a reconsideration of value from the appraiser, providing your own comparable sales data. The BOV serves as a documented alternative view in that conversation.
I have a loan maturing soon and I’m not sure I can refinance. What should I do first?
Get a current BOV before your maturity date. Understanding your property’s current value, your likely refinancing proceeds at current LTV ratios, and the gap between those proceeds and your existing loan balance gives you and your lender the information needed to evaluate options: refinancing at a lower loan amount, a loan modification or extension, a sale, or other alternatives.