AppealingPropertyTaxesForYourHome:PreparingFor TheHearing
ReviewingCDUandgradeofyourhome
Reviewtheappraisaldistrict’sdescriptionofgradeandCDU(condition,desirabilityandutility) foryourhouse.Gradeisaqualitativeevaluationoftheconstructionmaterialsandlevelof craftsmanshipusedtobuildyourhouse.Mostappraisaldistrictshaveabouteightto15 differentgradestodescribehomesofvaryingquality.Entry-levelappraiserstypicallymakethe initialestimateofgrade.Theappraisaldistrict’sestimateofgradeforhouseswithina subdivisionoftenvariesforhomesthatareessentiallyidentical.Thiscanoccurwhentwoor moreappraisersareevaluatingthegradeofpropertieswithinasubdivision.TheCDUor conditionfactorishighlyunreliable.However,theappraisaldistrictusesthisasakeyfactorin valuingyourproperty.Theappraisaldistrict,inmostareas,believesitactuallyknowsthequality andconditionofimprovementsinhomesthatare20-to-80-years-old,eventhoughtheyhavenot beeninthehousesinceitwasinitiallybuilt.(Theappraisaldistrict’sstafftypicallymeasures andvisitshomeswhilestillintheconstructionprocess.Thisiswhyitislikelytheywereinyour homewhenitwasinitiallybuilt,iftheappraisaldistrictexistedatthatpointandtime.)Ifyoucan documentthateitherthegradeorCDUforyourhomeisnotaccurate,theappraisaldistrictwill probablycorrectthemandreviseyourvalue.
Reviewamenities
Reviewtheappraisaldistrict’sinformationregardingamenities–yearbuiltandyearremodeled. Ifyouarenotsuretheyearyourhousewasbuilt,itisoftenstampedintothelidonthetoilet tank.Reviewtheyearyourhomewasrenovated.Someappraisaldistrictsstillconsider renovationsperformedbetween20to40yearsago,eventhoughthecontributoryvalueofa renovationmayonlylastforfiveto10years.Someownersbecomeconcernedaboutappealing iftheyhaveamenitiesnotdescribedontheappraisaldistrictrecords.Forexample,ifyouhavea swimmingpoolnotlistedontheappraisaldistrictrecordsyoumaywonderifyoushouldbe concernedaboutappealing.(Ifyoufileanappeal,willtheappraisaldistrictcomeinspectyour house?Mostlikelynot.)Appraisaldistrictshandlealargevolumeofappealsduringtheproperty taxappealseason.Therefore,theyarenotabletovisitpropertiessimplybecausetheowner filesanappeal.
Documentingmeaningfuldeferredmaintenance.
Whilemanyhomeshavecracksinthedriveway,itisnotlikelytobeaneffectivefactorina propertytaxappealhearing.However,theappraisaldistrictstaffandARBwillconsiderfactors suchasrottenwood,peelingpaint,roofleaks,foundationproblems,settlementandother similarproblems.Obtainingabidofthecosttocorrecttheproblemsisthemosteffectiveway toutilizethisinformationinapropertytaxappealhearing.
Developingamarketvalueappeal
Comparablesalesarethecornerstoneofamarketvalueappealforahome.Theexceptionmay beanewhousewherecostisanimportantfactor.Sourcesofcomparablesalesdatacanbe foundintheHouseBill201packageobtainedfromtheappraisaldistrictandMLSsites. New-homediscounts
Recentlypurchasedhomesinsubdivisionswherebuildersareactive,ornearsubdivisionswhere buildersarestillactive,oftensellfor5%to15%lessthantheirinitialpurchaseprice.Thisis becausehomeownerswouldratherpurchaseabrand-newhomewithfreshpaintandcarpet thanaslightlyusedhome.Toputthisinperspectiveregardingtheimplicationforpropertytax protest:ifyoupurchasedyourhomefor$200,000twoyearsago,andarecurrentlyassessedfor
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$200,000,youareover-assessed!Researchingdataforrecentlysoldhomessoldbytheinitial owner(versusthebuilder)willdocumentthisdiscount.
Livableversussellable
OneofthefirststepstosellingahomeisinterviewingRealtors.Duringthisprocess, homeownerswillasktheirRealtor,“whatdoweneedtodotosellourhome?”Thecostsof preparingahomeforsalearesubstantial.Realtorswilltypicallyencouragehomeownersto replacecarpet,tileandotherflooring,interiorpaintandexteriorpaint,andlandscapingas appropriate.Realtorswillalsorequestthatanydeferredmaintenancesuchasroofs,foundation problems,rottenwood,HVAC,electricalproblems,offensivepetandsmokeodors,andplumbing problemsbeaddressed.Dependingontheconditionofyourhome,youshouldconsiderthe livableversussellablefactorwhenpreparingforyourpropertytaxappealhearing.Thevast majorityofhomessoldhavecosmeticupgradesperformedanddeferredmaintenancecorrected beforethepropertyissold.
Livableversussellableforatwo-year-oldhome
Adiscountmaybeappropriateforthecosttoprepareahomeforsaleandforthedifferentialfor newhomesversusslightlyusedhomes(inareaswherebuildersareactive).Whilethismay seemlikedoubledipping,Realtorswouldlikelyadvisesomeonewhohasatwo-year-oldhometo performcosmeticrepairssothehomelookssharpandshowswellbeforeitismarketed.
Presentationofsalesdata
Prepareasummarywithinformationonthesubjectpropertyatthetopofthechartanddatafor twotofivecomparablesalesbelowit.Arrayrelevantfieldssuchasaddress,accountnumber, yearbuilt,squarefeet,salesprice,saledate,salespricepersquarefootandimprovementprice persquarefoot.(Someappraisaldistrictsfocusmoreonthesalespricepersquarefootfor improvementsversustheoverallsalespricepersquarefoot.Youcancalculatethe improvementpricepersquarefootbydeductingtheappraisaldistrict’sassessedvalueforthe landfromthetotalsaleprice.Theresultingvalueisthesalespricefortheimprovements. Calculatethesalespricepersquarefootofimprovementsbydividingthesalespricefor improvementsbythesizeofthehouse).
Unequalappraisal
Unequalappraisalisaneffectivetoolinappealingpropertytaxesannuallytominimizeyour propertytaxes.Formanyowners,itisnotpracticaltoappealbasedonmarketvaluesincethe valuedeterminedbytheappraisaldistrictislessthantheactualmarketvalue.Although addressinglivableversussellabledoeshelpinthesecases,usingunequalappraisalprovides mostownersanotherbasisforappeal.Section41.43oftheTexasPropertyTaxCodeprovides thebasisforappealingonunequalappraisalandreadsasfollows:“aprotestonthegroundof unequalappraisalofpropertyshallbedeterminedinfavoroftheprotestingpartyunlessthe appraisaldistrictestablishesthat…theappraisedvalueofthepropertyisequaltoorlessthan themedianappraisedvalueofareasonablenumberofcomparablepropertiesappropriately adjusted.”
Importantcomponentsofanunequalappraisalappealincludeareasonablenumberof comparablepropertiesthatareappropriatelyadjusted.Comparablepropertiesaregenerally consideredtobepropertiesthataresimilarwithregardtothequalityandquantityof improvements.Areasonablenumberofcomparablesareoftenconsideredtobebetweentwo and10.Ifthere’sonlyonecomparablethatsupportsreduction,youarelikelytobeequitably assessed.Inmostcases,weprefertohavemorethanjustoneassessmentcomparable. However,someimprovementsareatypicalandtherearealimitednumberofcomparables.For example,therearenotalargenumberofbowlingalleysthatwerebuiltinthelastfiveyearsin northwestDallas.Neitheraretherealargenumberof4,000square-foothomesinanareawhere mosthomesrangeinsizefrom2,000squarefeetto2,500squarefeet.Forhomes,youshould focusonpropertieswithinthesamesubdivision,providedcomparablepropertiesareavailable withinthesubdivision.Whenappealingyourhome,itisprobablynotnecessarytomake appropriateadjustments.Mostappraisalreviewboardswillconsiderevidenceregarding unequalappraisalbasedonreviewingtheassessmentcomparables.
Reviewandanalyzetheinformationonunequalappraisaltheappraisaldistrictprovidedinthe HouseBill201package.Y ywanttoresearchtheassessmentcomparableschosenbythe appraisaldistricttoseewhethertheyarecomparablebasedonsize,location,yearbuiltand quality
Prepareyourownunequalappraisalanalysisbasedonresearchingassessmentcomparables ontheappraisaldistrict’swebsite.Iftheappraisaldistrictdoesnothaveawebsite,senda requestforinformationorvisittheappraisaldistricttoobtaintheassessedvalueforsimilar homes.Selectassessmentcomparablesandsummarizethedatainatable.Ifyoubelieveitis appropriateandfeelcomfortabledoingso,makeadjustmentstoaddressthedifferences betweenthesubjectpropertyandtheassessmentcomparables.
Doappraisaldistrictsandappraisalreviewboardsfollowthelawregardingunequalappraisal? Unfortunately,manyappraisaldistrictsbelievetheyareimmunefromfollowingthislaw.This alsoappliestothelawswhichprovideownerstherighttoHouseBill201information,a scheduledhearing,burdenofproof,unequalappraisalandanindependentARB.Moreoften thannot,theappraiserattheinformalhearingwillnotconsiderinformationregardingunequal appraisal.However,itislikelytheappraiserwillofferareductioninassessedvaluetoresolve theappealsoitdoesnothavetobeaddressedattheARBhearing.Whileunequalappraisalis clearlyintendedtobeabasisforappeal,thislawisfairlynew.Acombinationoftime,legislation andlitigationwillresolvetheseproblems.
Youhavenowcompletedthreeanalysesregardingthetaxassessmentforyourhome:
1.Errorsintheappraisaldistrict’sdata,
2.Marketvalue,and
3.Unequalappraisal.
Reviewtheadvantagesanddisadvantagesofeachanalysistodeterminewhatinformationis mosteffectiveforyourpropertytaxappeal.AlsodeterminewhatO’Connor&Associate’sterms asatargetvalueandARBvalue.Thetargetvalueistheopeningnegotiatingpositionyouwill requestwhenyoustartthenegotiation.TheARBvalueisthehighestvalueyouwillacceptat theinformalhearing.
ReadmoreaboutAppealingPropertyTaxesforYourHome ReadmoreaboutTheHearingProcess
PatrickO’Connor,adesignatedmemberoftheAppraisalInstitute,ispresidentofO’Connor& Associates.Thefirm,inbusinesssince1974,specializesinrealestateappraisals,research,and stateandfederaltaxreductionservicesnationwide.WithofficesinHouston,Dallas,Los AngelesandNewportBeach,thefirmemploysmorethan180people.PatrickO’Connoris frequentlyacknowledgedbynationalpublicationsasarespectedsourceofinformationonreal estate.Visitwww.cutmytaxes.com.
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By:PatrickO'Connor|Postedon03/31/2019withcomments
