It’s that time of year again… the grass is turning green, the flowers and trees are budding… and your property tax valuation has just arrived in your mailbox. When property tax valuations come out, just like most people… You’re Bi-Polar when It comes to the value of your home!!!
During most of the year, especially if you are trying to sell your property, you think, “My house is worth way more than that!” However, at the start of May, when that Notice of Appraised Value hits your mailbox, you get bi-polar and think, “There’s no way my house is worth that much!” It’s at this point that you begin to wonder where all of those very different appraisal numbers really come from and what’s the difference in all of the values that you hear about when you’re talking about real estate. There’s Market Value, Appraised Value, Tax Assessment Value and all of the Automated Valuation Models (AVM’s) used by the major real estate web sites to come up with their own “Zestimate” of the property value.
During the month of May, the value that you are mostly concerned about is the Tax Assessment Value and your primary goal is to make it go down. That’s the topic of this post and we’ll tell you what you can do to make that happen. But first lets define some of these other values.
Market Value ~
The amount of money, in US dollars, which could be obtained for property exposed to the market for a reasonable period of time, where both parties are knowledgeable regarding all possible uses and defects with the property and neither party is under duress to consummate the transaction.
Wow… what does that mean? Simply stated, Market Value is what a reasonable person would be willing to pay for a property in the current market. One of the best sources of Market Value for your property is a Realtor that is familiar with your neighborhood and has the tools to research what similar properties in your neighborhood have recently sold for. When done correctly, the value will not simply compare price per square foot numbers or just be based on the number of bedrooms and bathrooms. The whole property should be considered with all of it’s unique features and amenities. A quality Comparative Market Analysis (CMA) should use comparable homes that have recently sold and should take into account the location of all properties considered, the size and value of the lots they sit on, the size of the homes, the age of the homes, the number of bedrooms and bathrooms, the garage spaces available, the flooring materials, the kitchen counter materials and appliances, roofing materials, fencing, irrigation systems and anything else that will add value or take value away from a property.
Creating a quality CMA will take a good Realtor a couple of hours to create but will provide their clients with a very accurate estimate of the Market Value of their home based on the recent sale of other properties in their neighborhood. Amie and I are both certified as Broker Price Opinion Resources (BPOR) and can provide you a FREE Market Analysis of your property. To request a FREE Market Analysis of your property CLICK HERE.
Appraised Value ~
The Appraised Value is the opinion of value placed on a property by a licensed appraiser. The process used by an appraiser is very similar to the process described above. However, appraisers do not take into consideration current market or inventory conditions and rely instead on historical data to make their determination value. Again, this is the individual appraisers OPINION of value and may differ from the OPINION of a different licensed appraiser who evaluated the property on the very same day.
In real estate transactions, Appraised Values are used by lenders to determine the amount of money they are willing to offer for a mortgage. Appraisal standards also differ depending on the type of financing that is being considered. VA financing requires a VA appraisal and FHA financing requires an FHA appraisal. Both of these appraisals are done by pool appraisers that are randomly selected. Conventional financing is offered by mortgage lenders and require a conventional appraisal from an appraiser of the lenders choosing.
AVM’s or Zestimates ~
Automated Valuation Models (AVM’s) use mathematical modeling combined with a data base of information to determine a property value. This is a technology driven valuation that comes from public record data and computer decision logic that calculates an estimate of the probable selling price of a residential property. The problem with AVM’s is a lack of accurate data for the computer to work with. Some states do not disclose the actual value of property sales to the public. These states are called Non-Disclosure States and include Idaho, Indiana, Kansas, Mississippi, Missouri, Montana, New Mexico, North Dakota, South Dakota, Texas, Utah, and Wyoming. As the old computer programming adage goes “Garbage in… Garbage out.”
The most well known real estate AVM is Zillow.com’s Zestimate. Information from their web site states that nationally the Zestimate has a median error rate of 6.9%. However, Texas being a non-disclosure state, data which is generally publicly available is not accessible and the Zestimate Accuracy Table does not even attempt to report accuracy data for the State of Texas.
Zillow does attempt to collect data in Dallas/Ft Worth but still falls dramatically short on accuracy stating that they are within 5% of the sales price 25.5% of the time and within 20% of the sales price 82.2% of the time. On a $200,000 property, that translates to being more than $10,000 dollars off approximately 75% of the time and more than $40,000 off approximately 20% of the time.
Tax Assessment Value ~
The Tax Assessment Value is the value reported on the Notice of Appraised Value that you just received in the mail from your county Central Appraisal District. Since your county Central Appraisal District has hundreds of thousands of homes to place values on they cannot possible consider each home individually so they use a process called Mass Appraisal.
Mass appraisal is a process used to value real estate when it is not possible to perform an individual appraisal for each property. The process usually involves compiling data regarding the physical characteristics of the property and market data such as rental rates, vacancy rates, expense rates, other income, capitalization rates, cost data and comparable sales data. Valuations are calculated using data for each subject property with the market data. Statistical processes including regression analysis are performed to develop an estimate of value for each property. This is the process typically used by appraisal districts in Texas to estimate the market value for real estate.
The Tax Assessment Value is determined by the county Central Appraisal District and used exclusively by the various taxing entities to determine the amount of tax you owe based on the value of your property. This is called the Ad Valorem Tax rate. For a property with a $200,000 Tax Assessment Value and a city tax rate of 0.770819 with no tax exemptions applied the tax owed on that property would be $1,541.64.
The mass appraisal process is an efficient method of placing value on an enormous number of properties but does not effectively place an accurate value on any individual property. Using the Economic Man Theory you learned in high school or college, everyone is responsible to look out for his own best interest, correcting the value placed on your property is your responsibility.
How Do I Get The Appraisal District To Adjust My Property Value?
There are Central Appraisal Districts in each county of Texas. Each Central Appraisal District has its own procedures for protesting your property valuation but they are all guided by the State of Texas Comptroller’s Office. To help residents understand how to protest their Tax Assessment Value, the Dallas Central Appraisal District (DCAD) published this video explaining the process. While this is a DCAD specific video the process is very similar for other Central Appraisal Districts.
Five Property Tax Basic Rules from the Texas Constitution
- Generally, all tangible property must be taxed on its current market value (effective January 1). The Texas Constitution provides certain exceptions, such as productivity values for agricultural and timber land. The property’s market value is “the price for which it would sell when both buyer and seller seek the best price and neither is under pressure to buy or sell”. Land used for farming and ranching, by contrast, can be valued on its capacity to produce crops or livestock instead of its market value. Such appraisal is called agricultural appraisal. Similarly, special timberland appraisal is available to property owners whose land produces timber for commercial use.
- Taxation must be equal and uniform. All property, whether residential or commercial, must be taxed equally and uniformly. No single property or type of properties should pay more than its fair share of taxes.
- Exemptions may exclude all or part of a property’s value from taxation. All property is taxable unless a federal or state law exempts it from the tax. The Texas Legislature may provide certain exemptions.
- Property owners have a right to reasonable notice of increases in appraised property value.
- Each property in a county must have a single appraised value.
Should I Protest My Property Valuation?
The first step in the appeal process can be as simple as using the Informal Appraisal Review Process mentioned in the video. If you use the Informal Appraisal Review process and are not satisfied with the results you can then move on to the Appraisal Review Board (ARB) hearing. At the ARB hearing, the ARB must base its decisions on evidence and it hears evidence from both you and the chief appraiser.
Protest Issues That An Appraisal Review Board Can Consider Include:
The proposed value of your property too high.
Ask one of the appraisal district’s appraisers to explain the appraisal. Verify that the appraisal reflects the correct property description, measurements for your home or business and lot, and any defects. Gather blueprints, deed records, photographs, a survey or your own measurements, statements from builders or independent appraisals to contest the appraiser’s decision. Collect evidence on recent sales of properties similar to yours from neighbors or real estate professionals. Ask the appraisal district for the sales that it used.
- If you protest the agricultural value of your farm or ranch, find out how the appraisal district calculated your value. Compare its information with that of local experts on agriculture, such as the county agricultural extension agent, the U.S. Department of Agriculture or other recognized agricultural sources. The Comptroller’s Manual for the Appraisal of Agricultural Land may be helpful.
Your property is valued unequally compared with other property in the appraisal district.
Determine whether the property value is closer to market value than other, similar properties. Ask the appraisal district for appraisal records on similar properties in your area. Is there a big difference in their values? This comparison may show that your property was not treated equally. A ratio study or a comparison of a representative sample of properties, appropriately adjusted, for determining the median level of appraisal must be prepared to prove unequal appraisal.
This is one of the most common sections of the law used to reduce the appraisal districts value of your home. For your reference it is Texas Tax Code – Section 41.43 – Protest of Determination of value of Inequality of Appraisal. This is one of the few times that the rules favor the property owner instead of the appraisal district. The appraisal district sends out the Notice of Appraised Value and the property owner has the opportunity to file a protest in a timely fashion.
The property owner has three advantages when appealing on this point:
The appraisal district has the burden of establishing the value of the property by a preponderance of the evidence presented at the hearing.
The property owner has the right to appeal on the basis of an unequal appraisal.
- The property owner has the right to obtain the appraisal district evidence 14 days before the hearing. This is called an HB 201 Package because it is legislated in House Bill 201 section 41.461 of the Texas Property Tax Code.
The chief appraiser denied an exemption.
First, find out why the chief appraiser did so. If the chief appraiser denied your homestead exemption, for example, obtain evidence that you owned your home on Jan. 1 and used it as your principal residence on that date.
- If the chief appraiser denied a homestead exemption for part of the land around your home, show how much land is used as part of your residence.
- If the chief appraiser denied a homestead exemption for age 65 or older, disabled persons, disabled veteran’s, or spouse of military member killed in action, read about the qualifications for exemptions in the Comptroller’s Texas Property Tax Exemptions.
Be sure to check your exemptions and take advantage of all of the savings allowed by law!!!
The chief appraiser denied agricultural appraisal for your farm or ranch.
Find out why the chief appraiser denied your application. Agricultural appraisal laws have specific requirements for property ownership and use. Prove that your property qualifies for special appraisal based on its productivity and intensity of use.
- Gather your ownership records and management records or obtain information from local agencies that provide services for farmers and ranchers.
- The chief appraiser determined that you took your land out of agricultural use.
Is agricultural activity still taking place on your land? If you have taken only part of the land out of agricultural use, you may need to show which parts still qualify. If you are letting land lie fallow, show that the time it has been out of agricultural use is not excessive or is part of a typical crop or livestock rotation process for your county.
The appraisal records show an incorrect owner.
- Provide records of deeds or deed transfers to prove ownership.
- If you acquired the property after Jan. 1, you may protest its value before the protest deadline. The law recognizes both the old and new owners as having an interest in the property’s taxes.
Your property is being taxed by the wrong taxing units.
- An error of this sort often is simply a clerical error. For example, the appraisal records may show your property as located in one school district when it actually is in another.
Your is property incorrectly included on the appraisal records
- Some kinds of taxable personal property move from place to place quite regularly. Property is taxed at only one location in Texas. You can protest the inclusion of your property on the appraisal records if it should be taxed at another location in Texas or out of state.
The chief appraiser or Appraisal Review Board failed to send you a notice that the law requires them to send.
- You have the right to protest if the chief appraiser or ARB fails to give you a required notice. But unless you disagree with your appraisal, there is no point in protesting such a failure. Make sure that the appraisal district has your correct name and address.
- A notice is presumed delivered if sent by first-class mail with a correct name and last known address. In some instances, notices are sent certified mail, and the date of delivery is shown on the return receipt card. The timeliness of communications is determined by the post office cancellation mark, a receipt mark of a common or contract carrier or other proof it was deposited with the carrier. If you prove that you did not receive the notice, the appraisal district must prove that it mailed the notice properly.
- You cannot protest failure to give notice if the taxes on your property are delinquent. Before the delinquency date, you must pay a partial amount, usually the amount of taxes that are not in dispute. You may file an oath of inability to pay the undisputed taxes and the ARB will hold a hearing to determine if prepayment would constitute an unreasonable restraint on your right of access to the ARB.
The appraisal district or ARB took any other action that affects you.
- You have the right to protest any appraisal district action affecting you and your property. For instance, the chief appraiser may claim your property was not taxed in a previous year. You may protest only those actions that affect your property.
Should I manage my appraisal review or hire someone to do it for me?
Opinions are mixed on this one. Yes, you can do it yourself and statistically you will be able to get a positive result. You will have to do your own research on on Market Values and Tax Assessment Values but those numbers are available from a good Realtor and your county Central Appraisal District. However, if you hire someone to do it for you, they have a staff of people that are familiar with the laws, systems and procedures used by the Appraisal Districts. CLICK HERE to see a news story out of Houston that encourages people to manage the process themselves.
If I Hire Someone, Who Should I Hire?
There are numerous tax attorneys and tax appeal companies that are willing to take your case to the ARB. Some of them work for a flat rate and others work for a percentage of the tax savings. Here are just a few that I came up with using an internet search. I have not personally used any of these and cannot endorse any of their results. I do know someone that has used O’Connor & Associates and they have nothing but good to say about the results they have delivered.
- O’Connor & Associates
- North Texas Property Tax Service
- The Ray Tax Group
- Property Tax Protest .com
- Law Office of Tiffany L. Hammil
PLEASE… PLEASE… PLEASE… IF YOU HAVE EXPERIENCE WITH THESE COMPANIES OR ANY OTHER COMPANIES OFFERING TAX ASSESSMENT VALUATION REDUCTION SERVICES… USE THE COMMENTS SECTION BELOW TO SHARE YOUR KNOWLEDGE WITH THE REST OF US. I’LL ALSO USE YOUR COMMENTS NEXT YEAR WHEN THE 2015 NOTICE OF APPRAISED VALUE COMES OUT.
Here are some links to the Central Appraisal Districts in DFW
(This one is more detailed because it’s where I live and have more information available)
If you choose to protest your property appraisal yourself, You have several options.
1) The 2014 Notice of Appraised Value (the blue form you received in the mail) has a Property Appraisal – Notice of Protest for Tax Year 2014 printed on the reverse side. You can complete this form, include any evidence that you would like considered and mail it to the address at the top of the page.
2) You can request an Informal Appraisal Review by CLICKING HERE and following the procedures.
3) You can choose to file your protest online by using this link Electronic (eFile) Protest
If you choose to eFile your protest, the following conditions must be met:
- You received an Appraisal Notice with your eFile PIN printed on the right front section of the notice. Your PIN will be used as your signature. Your PIN is case sensitive – ENTER IT EXACTLY AS IT APPEARS ON THE NOTICE.
- The reason for your protest must be: 1) Value is over market value and/or 2) Value is unequal compared with other properties
Here are valuable links to resources from the Collin Central Appraisal District:
Forms – Notice of Protest, Homestead Exemption, Disabled Veteran Exemption, etc…
If you are claiming that the property value is too high or that the value is unequally compared with other property you are advised to use the CCAD Residential Sales Comparison Grid Model to make your case.
The Protest Process – PDF with Hyperlinks
How can I file my protest using uFile? – Instructions for filing your protest online
How to Protest Your Case at an ARB Hearing: A Homeowners Guide – from the Texas Comptrollers Office
Forms – Notice of Protest, Homestead Exemption, Disabled Veteran Exemption, etc…
Forms – Notice of Protest, Homestead Exemption, Disabled Veteran Exemption, etc…
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