A Property Tax Assessment is not the same as a Property Appraisal

All About Your Property Tax Assessment

Is the property tax assessment on this home accurate?
Is the property tax assessment on this home accurate? Probably not.

Your tax bill arrives and you have a heart attack. If your property is worth the property tax assessment the taxing district thinks it is worth, it’s time to SELL and retire to Aruba! If only.

Tax Assessment and Market Value Differences

Property tax assessments fall into three categories:

  • Low
  • Plausible (somewhat close)
  • High

If you’re in the first two categories, pay your taxes, file the paperwork and go fishing. If you’re in the last one (high), gear up to protest your property taxes, armed with real data that can help your cause. You should read, How Do I Appeal My Property Tax Assessment?

How Do Taxing Districts Determine Value?

If tax values aren’t the same as market value, how do taxing districts such as the Travis County Appraisal District (TCAD) come up with their numbers?

Tax districts use massive software programs with sophisticated algorithms to assess property values in an area. Although these values are supposed to assess property at actual market value, they frequently don’t.

The reasons for this are many, and include:

  • These programs use data available in public and governmental databases. This data may be accurate (number of bedrooms, size of the lot), or it may be wrong (3 bedrooms when a home has four because the game room was converted when the addition was added and the addition isn’t in the property records yet).
  • The software does not know about the actual condition of each property. Condition matters. In Travis and Williamson Counties, the programs use something called percent good, which is a marker of how nice your home is. Low percent good means the property isn’t in good condition, average condition (from my personal observation) seems to be in the 70s. High percent good ratings trigger the assessing program to give a higher value to your home as compared to a home that is otherwise completely comparable in size, location and condition that has a lower percent good rating. Although the taxing district is supposed to come out and verify these ratings in each neighborhood, that doesn’t always happen.
  • The application is frequently unaware of the market boundaries that define where values change, and sometimes they change by quite a lot. You may already recognize these boundaries, such as a major road where the subdivisions on either side map to a different elementary school or where one is much closer to noisy or yucky stuff (a stone quarry).

All of those things (or any of those things) will make your property tax assessment differ from what it should be.

How Do Appraisers Determine Value?

Appraisers determine fair market value differently than taxing districts. Some key differences:

  • Appraisers do not use automated valuation programs when appraising individual properties.
  • The appraiser will visit your property, measure it, and assess the actual condition of the property. Read Appraisal Steps: Determining the Market Value of Property.
  • After he or she has inspected your property (the appraisal inspection), he or she will carefully analyze your property vs. the most comparable (similar) properties that recently sold in your area, which is the Sales Comparison Approach, one of the three approaches to value used by professional appraisers.
  • When the analysis is complete, the appraiser will reconcile all of the information and arrive at an opinion of value which will be the appraiser’s opinion of the Fair Market Value of your property.
  • A good appraiser will understand the boundaries of market areas and other factors that influence the value of your own property and your report will reflect this expertise.

Protesting Your Property Tax Assessment: a Personal Tale

The value of this home was less than the property tax assessment on it. TCAD agreed.
The actual market value of this home was less than the property tax assessment on it. The taxing district agreed at the formal hearing and lowered the tax value.

The first time I protested my tax assessment in Texas (Travis County), long before I even knew anything about the practice of real estate appraisal, the guy showing me the data kept flashing numbers on the screen for a much newer subdivision that was across a major road that mapped to an elementary school that was, at the time, widely regarded to be superior to the elementary school in my neighborhood. In addition, the newer homes were closer to the city center, and had better access to major transportation corridors.

I pointed out a few things: the homes were much newer (built after 1994, vs built before 1982), the homes were on bigger lots (on average), the homes mapped to a better school. Of these three points, the hearing panel was interested in the first two (age and lot size) because these are more concrete data points. They weren’t particularly interested in my third point (the school). I also pointed out that my own area had an ample number of homes (thousands) that were arguably comparable in age and lot size to my own, with lower assessments, and questioned why they would skip those comps and use homes that were several miles away. I also quibbled with the percent good number assigned to my home (90%) when almost all of the others on my own street were marked in the 70s, including ones that I personally knew had expensive new updates that made them far superior in quality to my vintage 1982, seriously ugly house.

The formal hearing panel agreed with my assertions and lowered my tax assessment by about $25,000, which saved me about $700 that year alone.

Another year, I used a similar argument and saved even more. The next year, though, my property tax assessment was close to market value, so I let it slide.

Protesting Your Tax Assessment: Your Own Story

Have you received your tax bill in years past, heaved a big sigh and paid it? Why?

If you’re one of the folks whose property value is higher than the likely fair market value, fight it. What have you got to lose? What have you got to gain?

Facing the formal hearing panel the first time can be intimidating, but don’t let it get to you. Arm your self with concrete data, and if you’re really uncomfortable arguing your case, hire a tax protest company to argue for you.

One excellent piece of evidence you can (and should) use to protest your taxes is a professional real estate appraisal, from a certified residential appraiser.

Hire us to perform your appraisal, and either you will discover that the property tax assessment is low, close, or high. A typical appraisal will cost $350 to $425, depending on the size and complexity of the property, and this is money well spent. If we were to receive another tax bill for our own home that felt out of bounds, we would hire another appraisal firm to appraise our own property, to provide the evidence we needed to protest. (We can’t appraise our own property because that would be a conflict of interest.)

To get started, read our more specific tax protest, How do I Appeal my Property Tax Assessment?

Another good read is, Appraisal Steps: Determining the Market Value of Property.

Comments

  1. says

    A good appraiser will understand the boundaries of market areas and other factors that influence the value of your own property and your report will reflect this expertise.

  2. says

    To avoid this the valuation can be done properly by the experts on the basics of the property and as per the current market rate will solve this issues.

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Independent Real Estate Appraiser in Austin, Texas: Travis, Williamson, Hays, Bastrop and Caldwell Counties