John Henke, SRA has answers to "Frequently Asked Questions"

John Henke, SRA is prepared to elaborate on any concerns you might have about appraisals in Plano and Collin County. Don't hesitate to contact us today.

What is an appraisal?
What does an appraiser do?
Why would someone request your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
After completing the report, how can I have certainty that the final number is trustworthy?
What are the requirements to be a certified appraiser?
Who hires an appraiser?
Where does John Henke, SRA get the data used to estimate values in Collin County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Does the appraiser need anything from the homeowner in advance?
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (List of questions)

The appraisal process is an estimation that leads to an opinion of value. This opinion or estimate is concluded through the use of a formal process that commonly uses three "common approaches to value". One of the methods in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, minus age and physical deterioration, adding the land value. The Sales Comparison Approach deals with searching for comparable properties in close proximity and figuring out the value based on comparing those homes to the property being investigated. Being the most popular approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a property. The Income Approach is mainly used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.

What does an appraiser do?   (List of questions)

An appraiser forumlates a fair and credible assessment of market value, often in the context of a real estate purchase. Appraisers demonstrate their professional investigation in appraisal reports.


Why would someone request your services?   (List of questions)

There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
  • To get a loan.
  • If you would like to reduce your property tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
  • To challenge high property taxes.
  • To settle an estate.
  • To offer you a negotiating tool when purchasing real estate.
  • To find an honest property value when listing your home.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because a government agency such as the IRS requires it.
  • If you are ever involved in a civil case.
Click here for a more detailed explanation of the process dealing with getting an appraisal.


What is the difference between an appraisal and a home inspection?   (List of questions)

The appraiser is not a home inspector nor does he/she do a full home inspection. The point of a home inspection is to investigate the structure of the house from bottom to rooftop. Generally, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (List of questions)

Simply put, it's like comparing sugar and saccharin. The CMA depends on vague local market trends. Appraisals use similar sales which are verifiable resources. Location and building prices are also a priority in an appraisal. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

Who's creating the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, Texas licensed professional who has formed their livelihood on valuing properties in and around Collin County is behind the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for assignments, regardless of their value conclusion.

What's in an appraisal report?   (List of questions)

The main purpose of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the report.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible factors.
  • All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • What was included in the activity of completing the appraisal.
For a more comprehensive view of what goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have certainty that the final number is trustworthy?   (List of questions)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • The appraisal used an apropos analysis of the information.

  • That substantial errors of omission or commission were not committed individually or collectively.

  • That appraisal services were provided in a careful and conscientious manner.

  • That a solid, defensible appraisal report was communicated.
There are intense classroom and on the job experience requirements that must be adhered to in order to achieve the title of "licensed appraiser" in Texas. Plus, appraisers must obey a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (List of questions) Licensing and certification requires coursework, tests and real world experience. Once licensed, he/she must then complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who hires an appraiser?   (List of questions)

Mortgage lenders are an appraiser's typical customer, requesting their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does John Henke, SRA get the data used to estimate values in Collin County or other areas?   (List of questions)

One of the primary activities of an appraiser is to assimilate data. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is received from a number of places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Appraisers often have to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other properties in the same market.

Why should I hire a licensed appraiser?   (List of questions)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine a price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, you can avoid overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from John Henke, SRA is the best documentation to ensure assets are split up evenly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that?   (List of questions)

PMI is short for for Private Mortgage Insurance. It protects the lender in the event a borrower defaults on the loan and the value of the property is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Has your real estate appreciated since you first purchased? Contact John Henke, SRA today at 469-269-3975. You may be able to save money by removing your Private Mortgage Insurance payment.

Does the appraiser need anything from the homeowner in advance?   (List of questions)

The first step in most appraisals is the property inspection. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any shrubs and relocate any items that would get in our way while we measure the structure. Indoors, make sure we can get to items like furnaces and water heaters.

You can make our visit go faster and improve the quality of the appraisal report by having the following things on hand:
  • A plot plan or survey of the house and land (if available).
  • A list of any personal property that will be left behind and sold with the home, such as a oven, or a washer and dryer, if applicable.
  • Most recent real estate tax bill from Collin and or legal description of the property.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".

How does an appraiser define "Market Value"?   (List of questions)

In real estate appraising, Market Value is commonly defined as:

"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

Who has rights to the appraisal report?   (List of questions)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is entitled to a copy of the report - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.

It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.

Are some home improvements more worthwhile than others?   (List of questions)

It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

No matter where you go, however, renovating a kitchen is almost always a safe move. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms were second, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.