Understanding the Appraisal Process

Purchasing a house can be the biggest financial decision most may ever encounter. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.

The majority of the participants are very familiar. The real estate agent is the most known person in the exchange. Then, the lender provides the financial capital necessary to fund the exchange. And the title company ensures that all details of the sale are completed and that a clear title transfers from the seller to the buyer.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Pinnacle Valuation Group LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Pinnacle Valuation Group LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser pulls information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the communities in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Bella Vista and Benton, Pinnacle Valuation Group LLC is second to none. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Pinnacle Valuation Group LLC will help you get the most accurate property value, so you can make wise real estate decisions.