Feasibility Study vs. Appraisal: Key Differences

Q: Do I need both a feasibility study and an appraisal?

Yes, for development projects, you typically need both. A feasibility study validates the project concept and evaluates whether the proposed project is viable and profitable. It's forward-looking and helps answer "Should I build this?" An appraisal determines the property value—either current value or projected value after development. It's essential for financing, as lenders need to know the property's worth. Lenders often require both documents for development financing because they provide complementary information: the feasibility study assesses project viability, while the appraisal determines collateral value.

Introduction

Many people confuse feasibility studies and appraisals, but they serve different purposes and are used at different stages of a project. Understanding their differences is crucial for making informed decisions.

This guide explains the key differences between feasibility studies and appraisals, when you need each, and how they work together in the development and financing process.

For comprehensive information, see our Feasibility Studies Complete Guide and Property Appraisals Complete Guide.

What is a Feasibility Study?

A feasibility study evaluates whether a proposed project is viable and profitable. It's forward-looking and answers questions like:

Should I build this project?
What will revenues and expenses be?
What are the risks?
How can I optimize the project?

Feasibility studies focus on a project that doesn't yet exist, analyzing market potential, financial viability, and strategic recommendations.

What is an Appraisal?

An appraisal determines the current value of an existing property. It's present-focused and answers questions like:

What is this property worth today?
What is the fair market value?
What would it cost to replace this property?

Appraisals evaluate existing properties using methods like income approach, sales comparison, and cost approach.

Key Differences

Here are the main differences:

Purpose

Feasibility Study: Evaluates project viability
Appraisal: Determines property value

Focus

Feasibility Study: Forward-looking (future project)
Appraisal: Present-focused (existing property)

Content

Feasibility Study: Market analysis, financial projections, strategic recommendations
Appraisal: Property valuation using standardized approaches

When Used

Feasibility Study: Planning and development stage
Appraisal: Financing, buying/selling, refinancing

When Do You Need Each?

You need a feasibility study when:

Planning a new development
Expanding an existing property
Evaluating an acquisition opportunity
Securing development financing
Making go/no-go decisions

You need an appraisal when:

Securing financing for an existing property
Buying or selling a property
Refinancing
Determining insurance value
Tax assessment disputes

For development projects, you typically need both: a feasibility study to validate the project concept, and an appraisal to determine the property value after development or at different stages.

How They Work Together

In development projects, feasibility studies and appraisals complement each other:

Feasibility Study First: Validates project concept and provides financial projections
Appraisal During/After: Determines property value at various stages
Both for Financing: Lenders often require both to assess project viability and property value

The feasibility study informs the appraisal by providing projected income and expenses, while the appraisal validates the property's value based on those projections.

Frequently Asked Questions

Do I need both a feasibility study and an appraisal?

Yes, for development projects, you typically need both.

A feasibility study validates the project concept and evaluates whether the proposed project is viable and profitable. It's forward-looking and helps answer "Should I build this?"

An appraisal determines the property value—either current value or projected value after development. It's essential for financing, as lenders need to know the property's worth.

Lenders often require both documents for development financing because they provide complementary information: the feasibility study assesses project viability, while the appraisal determines collateral value.

Can I use a feasibility study instead of an appraisal?

No, they serve different purposes and cannot be substituted for each other.

A feasibility study evaluates project viability—whether a proposed project is worth pursuing and how to optimize it for success. It's forward-looking and focuses on the project concept.

An appraisal determines property value—what the property is worth in the current market. It's present-focused and essential for financing, transactions, and investment analysis.

Both are typically needed for development financing because lenders need to assess both project viability (feasibility study) and collateral value (appraisal).

Which comes first, feasibility study or appraisal?

For new developments, the feasibility study typically comes first.

The feasibility study should be completed early in the planning process to validate your project concept before you commit significant resources. It helps you understand if the project is viable and worth pursuing.

The appraisal can be done:

During development: To assess value as the project progresses
After completion: To determine final property value for financing or transactions

Some lenders may require a pre-development appraisal to establish baseline value, while others will accept an appraisal closer to project completion. Your lender can clarify their specific requirements.

Have more questions? Let's discuss your project.

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Feasibility Study vs. Appraisal