The 2018 Notice of Appraised Value Has Arrived…There Is No Way My House Is Worth That Much!!!
The appraisal districts have mailed the 2018 Notice of Appraised Value for your home a little earlier than usual this year. Due to the passage of HB 2228 during the 2017 Texas Legislature, changes were made to the property tax protest filing deadline; the statutory protest deadline was changed to May 15 from May 31, or 30 days after the delivery of the Notice of Appraised Value, whichever is later. Notices of Appraised Value for all Real Property were mailed on April 13, 2018, and the Protest Deadline for all Real Property, based on the April 13thmailing date, will be May 15, 2018. Do not wait until the end of next month like you are used to doing or you will miss the new deadline!
And while we are on the topic of deadlines, you also have until April 30 to file for most of your exemptions, including your homestead exemption if you bought a home last year and closed on it before January 1, 2018.
THE VALUE OF YOUR HOME
There are a lot of different appraisal numbers that pertain to your home. There’s Market Value, Appraised Value, Tax Assessment Value and all of those Automated Valuation Models (AVM’s) used by the online property search sites that come up with their own values and have their own branded names like “Zestimate”. For the next 30 days, unless you are buying or selling a home, the only value you are concerned with is the Tax Assessment Value and your primary concern is to make it go down. That is the topic of this post and we’ll give you some ideas on how to make that happen. But first let’s define some of those 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.
Isn’t that a mouthful! More simply stated, Market Value is the amount that a reasonable person would be able to purchase the property for in the current market. The best source 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. The result of the neighborhood research will be a Comparative Market Analysis (CMA) that doesn’t just look at price per square foot or compare the number of bedrooms and bathrooms but considers all of the unique features and amenities of the home. When done properly, a CMA should use comparable properties in your neighborhood that have sold within the last 180 days, take into account the location of the homes, the size and value of the lot that the homes sit on, the age of the homes, the number of bedrooms and bathrooms, the garage and other parking spaces that are available, the flooring materials used in the home, the finishes used in the kitchen for cabinets and countertops, the kitchen appliances, roofing materials and the condition of the roofing materials, fencing, irrigation systems and anything else that will add value or take value away from a property.
Creating a high-quality CMA like the one described is a lot of work and is typically done for a homeowner that is ready to sell their home. Buying or selling a home is typically the largest single transaction that most people ever make. Having a well thought out and researched CMA is invaluable to a homeowner and is an excellent tool for making good decisions about the current market value of your home. Amie and I both hold Broker Price Opinion Resource (BPOR) certifications and can provide you with 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 appraiser’s OPINION of value and may differ from the OPINION of another 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 requires a conventional appraisal from an appraiser of the lenders choosing. Again, appraised value is simply a value placed on a property to determine if the asset will cover the amount of the loan in case of a foreclosure. The appraiser that is rendering the opinion of value has the executed offer contract in their hand when they are doing the appraisal and use it to determine if the property will cover the lender’s liability.
AVM’s or “Zestimates”: Automated Valuation Models (AVM’s) use mathematical modeling combined with a database 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 the 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. As of February 13, 2018, Information from their website states that nationally the Zestimate has a median error rate of 4.6%. Since Texas is 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 33.1% of the time and within 20% of the sales price 79.6% of the time. On a $300,000 property, that translates to being more than $15,000 dollars off 66.9% of the time and more than $60,000 off 20.4% of the time. (Based on Zillow’s February 13, 2018 update)
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.
WHAT DOES THE TEXAS CONSTITUTION SAY ABOUT PROPERTY TAXES?
- 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.
PROTESTING YOUR PROPERTY VALUATION
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 in 2011 explaining the process. While this is a DCAD specific video the process is very similar to other Central Appraisal Districts.
INFORMAL APPRAISAL REVIEW: 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.
There are several things to consider when protesting the value that the appraisal district has placed on your property. The first is the value that the appraisal district has placed on your property and the second is if the value placed on your property is unequal when compared to other properties in the area.
If you believe that the appraisal district’s value is too high, use the informal appraisal review to 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 believe that the property has been unequally appraised when compared to other properties in the area, 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. Click Here for a Sample HB 201 Letter.
A few words about the Informal Appraisal Review Process. You have the option to mail your protest using the forms provided in the envelope with your Notice of Property Value, you can file your protest online from the comfort of your home, or you can go to the Central Appraisal District office and make your informal appeal in person. I always recommend that you go to the office in person. While it is easier to send it in or file it online, it is also easier for someone sitting behind the anonymity of a computer screen to deny your appeal. If you go to the office in person, the appraiser will have to look you in the eye and I have never walked out of the office without some sort of reduction in the value of my home. This is absolutely a personal preference issue but I have found going to the office to be very effective.
If you go to the informal appraisal review and are not satisfied with the results, you can always ask to go before a Formal Appraisal Review Board (ARB) and make your case. If you choose to go that route, provide the HB 201 letter to the appraisal district and they are required to provide you with all of the evidence that they will present at the formal ARB.
SHOULD I MANAGE MY APPEAL 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 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.
If you don’t want to do the research and file your own appeal, there are numerous tax attorneys and tax appeal companies that are willing to take your case to the ARB for you. 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 good things to say about the results they have delivered.
If you have any questions about the protesting your 2018 Notice of Appraised Value, please don’t hesitate to give me a call or send me an email.
The forms are in the mail and several have already arrived. Your deadline is MAY 15th.
If you do your own appeal or if you use one of the companies that do appeals, I would love to hear your success stories!!!
FOR MORE INFORMATION ABOUT PROTESTING YOUR 2018 NOTICE OF APPRAISED VALUE CALL SCOTT JOHNSON AT 469-269-0911 OR EMAIL HIM AT SCOTT@FIREBOSSREALTY.COM