Appraisal

An appraisal is a detailed, structured analysis used by mortgage lenders to ensure that a property’s value is sufficient collateral to secure the loan amount. Appraisers rely on market data, comparable sales, and property conditions to make their determination.

Texas-Specific Nuance & Citation

Appraisers in Texas are licensed and regulated by the Texas Appraiser Licensing and Certification Board (TALCB) under Texas Occupations Code Chapter 1103. Real estate sales agents must not perform formal appraisals unless they hold a separate appraisal license.

The Trap

Many candidates confuse an appraisal with a Comparative Market Analysis (CMA). A CMA is an informal estimate of value prepared by a real estate sales agent or broker to guide buyers or sellers; an appraisal is a formal, highly regulated valuation conducted by a licensed appraiser.

Worked Example

A buyer enters a contract to buy a home in Midland for $400,000, applying for a mortgage. The lender hires a Texas-certified appraiser who evaluates the property and determines the market value is $385,000. Under the TREC promulgated Third Party Financing Addendum, the buyer can terminate and receive their earnest money back if the property fails to appraise for the sales price.