Sucks, doesn't it? Like you said, it makes no difference what condition the car is in...it can be a beater with a shot engine and the state will still assign an artificially high value to it with what has to be the biggest stealth tax increase ever to hit Texans. Dealers are exempt, however.
Never took the appraisal route though, it's just not worth it. The State knows this, which is why nobody will spend $150 to save $131 in sales tax.