We know that sometimes April is not the best month, why? It’s tax season. For some it means refunds. For others, it means sending a check to the IRS. Then the new valuation for your real estate property shows up in the mail. It is not unusual for properties to be overvalued.
This is something that you have some control over but most people don’t know how. So we will discuss property taxes and why it is important that you look closely at your new valuation. Is it a higher valuation than what you think it should be? If the answer is “Yes”, don’t worry there is a way to protest your taxes and get them where they should be. The biggest problem we see is that in Texas the central appraisal districts (CAD) will find the highest and best sales in your area and value all homes as if they were in the same condition. In many cases, most of us don’t have the time or money to put on a fresh coat of paint every year, remodel our kitchen and bathrooms every five years, and run out and re-landscape our home at the first sign of aging.
The CAD will assume that you do. The CAD will value your home properties that were completely remodeled, landscaped, repaired, and then sold on the open market for top dollar. The CAD will assume that these properties represent your home in its current condition. Central appraisal districts know that only a small percentage will protest this inflated value. It’s up to you to challenge this new value. One thing is for sure your homes appraised value affects your mortgage payment for the next year. Maybe you haven’t noticed this because it’s figured into your monthly payment. However, your mortgage payment can jump significantly from one year to the next because of of increased property taxes.First, you need to when and how your property is valued. All values are set on whatever the property was on January 1st of that calendar year.
For example, if you are having a new home built and on January 1st there is not a home on the land, and the next day on January 2nd the home is placed on the property value would be for the land only for that calendar year. Because the value is set at whatever the condition was on January 1st. Another example would be a swimming pool. If you have a swimming pool installed after January 1st it will not be added to the tax rolls until the following year. Next is how the property is valued.
There are three basic kinds of appraisals. Resale value by square footage (the most common), the cost to build the home, and third is the income approach. For most residential single-family homes the value will be based on resale value. For example, if your home is 1000 square feet and the value is $100,000 this means that CAD is valuing the home at $100 per square foot. If other homes in your area are selling for $70 per square foot and your value is set at $100, you can probably just protest your value on comparable values alone.
In most cases, you will need a real estate agent to help you get those comparable sales for you. You will need similar properties in the same area of your property and about the same size. Generally speaking, you should use sales that have taken within 6 months of January 1st. So let’s say that the other homes in your area are all selling at the $100 per foot the same as your appraisal. Then you will need to look at the condition. If the other homes are in much better condition than yours then you will need to get estimates for any and all repairs.
Get photos of the needed repairs. Then protest the value based on condition. Remember, all protests must be filed by May 31st! Ok, now you have protested what is next? Normally the CAD will have you discuss the value with one of their in house appraisers. Most of the time the value difference can be settled with the CAD appraiser.
If you still feel that the property is overvalued the next step is the Appraisal Review Board.Unfortunately, the way Texas Appraisal review boards are currently set up, the appraisal districts have a home-court advantage. Many members of the appraisal review boards have been in place for years, are located in appraisal district offices, and are comfortable with the officials at that office. Further, the current system lacks transparency. Records on how board members determine value are unavailable to the public.
Your hearing, however, will be made public on the internet. So if you protest your value and go to the ARB, you can see your hearing online. Just look your property up on the central appraisal website and see the link for your hearing at the bottom. To make matters worse the central appraisal district trains the appraisal review board members on how to interpret the information given to them, set the budget for the board members, and hold the hearings at the central appraisal district office. So when you go in there is a giant projection screen showing all the information the CAD wants the board members to see and you don’t have any access to it. At the beginning of each hearing the board members give a statement about how they don’t represent the CAD and are impartial. It’s very difficult to see how they can be impartial. So the odds of you being successful are limited at best. So if you don’t get the value you are seeking in from the ARB, the next step is to go before an arbitrator. There is a cost involved in submitting your case for an arbitration hearing. You must pay a $500 fee. $450 is refundable if you win your case under certain conditions. If you truly have a good case and many people do, it is in your best interest to file for this hearing.