The Texas Appraisals Process

Appraisals are an important part of the home loan process – whether you’re making a real property purchase or refinancing your home. Here, we answer your top questions about Texas appraisals.

What is an appraisal?

Simply put, a property appraisal is an estimate of a property’s market value. It’s generally required by lenders to assure that the mortgage loan amount does not exceed program loan to appraised property value guidelines (called a Loan to value, or LTV).

Why get an appraisal?

There are several reasons you may need appraisals, such as getting a loan, contesting high property taxes, negotiating real estate transactions, or determining a price when selling real estate. You might also need appraisals for things like establishing a replacement cost for insurance purposes, a divorce or estate settlement, protecting your rights in an eminent domain case, a lawsuit, or for a government agency requirement.

What methods are
Used in Texas appraisals?

The three most common appraisal procedures are
all used to assign a final value to a property.

1. Cost Approach

A formula is used to obtain the property value: Land value (vacant) added to the cost to reconstruct the appraised building as new on the date of value, minus the accrued depreciation the building suffers in comparison with a new building.

2. Sales Comparison Approach

In this, the approach most heavily weighted for single-family, owner-occupied properties, the certified residential appraiser compares the subject property to three to four “comps,” comparable properties in the neighborhood, ideally sold in the previous six months and within ½ mile of the subject property. 

3. Income Approach

In this approach, the real estate appraiser converts the potential net income of the property into a present value. 

Who owns appraisals?

Because it is the mortgage company that orders the real estate appraisal, the mortgage company owns the appraisal, even though the borrower does pay for it. The borrower does have the right to receive a copy, and the mortgage company may choose to give the borrower the original appraisal report.

Can another mortgage company be used after completed appraisals?

Yes, in most cases you will not have to pay for another appraisal if you change your mortgage company and the original mortgage company agrees to transfer appraisals. Some appraisal firms may charge a small fee for the clerical work that is required.

How can I assist the appraiser?

Of course! You can help the residential appraiser during the appraisals process by providing:

  • The purpose of the appraisal
  • The price of the property, if for sale
  • Existing mortgage loan information for the property
  • Items to include, like appliances, in the value of the property
  • For an income-producing property, the income breakdown and expenses for the last 12 – 24 months
  • A copy of the deed, survey, purchase agreement, or additional property papers
  • A copy of the current real estate tax bill, statement of special assessments, or balance owed on anything, i.e. sewer, water, etc.

Who determines the price of a property?

The real estate agent assists sellers in setting the sale price. They perform a Comparative Market Analysis (CMA), which is similar to Texas appraisals in that it looks at recent property sales in the neighborhood to arrive at a listing price. The seller may use the agent’s recommended price or choose to list their property for a higher price.


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