Understanding Property Taxes and Appraisal

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October 10, 2023

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Understanding Property Appraisals

If you purchased a property with financing then you received an appraisal from your lender. A lender will only loan on the appraised value given by the third party appraisal company. Most likely the appraisal and the sales price are the same value. Texas is a non-disclosure state which means no one knows how much you paid for your home except you, the lender and Realtors.

The City of Austin does their own appraisal which they base your property taxes on. Let’s say you purchased a home for $400,000 but the city valued the property different from the purchase price. For example, the city valued it less than the purchase price at $360,000 or perhaps higher at $420,000 because they don’t know what you bought your home for. You want the city to appraise your home for the lowest value possible because that makes your tax payment lower. The higher the appraised value the higher your taxes. The city’s appraised value of your home can be seen publicly on traviscad.org and should not be used as an accurate source of your property’s true value. Remember,  *value* is what someone will pay for it. Therefore, if the city values the home for less than what you paid for it, or less than the real market value, that is a good thing. Now that you understand the difference in appraisals- the one by your lender and the other by the city- you need to know how property taxes work.

Understanding Property Taxes

Texas law sets a 10% cap on the annual increase to the appraised value of your primary residence. The City has a Market Value and an Assessed Value. The Market Value is what the City thinks you could sell your home for in the current market, and the Assessed Value is value your property taxes are based on with the Homestead Exemption cap. These values can be seen on TravisCad.org and in the Notice letter from City. There is no cap on how much they can increase your market value for an investment property. As an investor, you need to be very vigilant about protesting your taxes every year so that you can keep the highest margin of cash flow.

Often times you will receive a lot of “junk” mail around April-May regarding your property value. Be sure to pay attention to the letter from the City of Austin that tells you what your appraised value is. There are many companies that will protest your taxes for you. This might be a good option for you if you don’t have time to go to court. I recommend Five Stone Property Tax if you’d like someone to protest your taxes for you. However, they take 40% of the tax savings they get you and take 0% if a reduction isn’t received. The next paragraph details how to protest your taxes yourself online and through the informal and formal hearing process.

How To Protest Property Taxes Online

(as of 2018)

The Notice of Appraised Value will be in your mailbox at the end of March. If you receive this letter after April 16th you may get a different deadline (you’ll know when you get this because the date is on the letter). This letter contains everything you need to E-File. An E-File protest serves as an informal protest hearing that can be done online.

  • Owner ID#
  • E-File Pin#
  • RefID#
  • legal address

Deadline to E-file your protest is May 8th

Deadline to protest by mail or in person is May 15th

If you lost this Notice of Appraised Value letter (or you “never received it”) then you can request a new Pin number by visiting traviscad.org/eservices and then clicking on the yellow box that says “E-File.” If you have protested your taxes in the past, then use your previous login information. Save your login information so that you don’t have to remember your pin number, username and password again. (You’re welcome for this responsible adult tip). Once you’ve logged in, you will choose “online appeals.” Then go to E-File which is the blue button in the right corner of the page.

If you chose to file your protest by mail, expect to wait weeks to have your protest scheduled, and then go to the district’s office for two appointments. The first appointment is for an informal settlement conference with an appraiser. Most protests are settled at this meeting. If the protest isn’t resolved, you can go on to a second appointment, to appear before the appraisal review board (ARB) for the formal hearing.

In the eFile system, you file and submit your protest online which serves as your informal hearing. The district will review your opinion of value and your property’s characteristics and those of the neighborhood, and compare your property’s value to recent selling prices and the values placed on other comparable properties. If this analysis indicates a reduction is warranted, they’ll email you a settlement offer notice. You’ll need to log on to the eFile website to indicate your acceptance (the link will be in the email). If you don’t accept the district’s new value, you’ll be scheduled to go straight to a formal hearing with the appraisal review board, which will independently examine the evidence. Essentially, filing online via eFile is a quicker process because it’s online (duh) and you’d only have to attend one appointment instead of two compared to protesting by mail. If you don’t live in Austin or just don’t want to attend the formal hearing you can file your evidence by affidavit. When you agree to a formal hearing (meaning you’ve rejected the informal hearing/eFile value) you accept that all other previous offers are no longer valid. Unless you file an appeal, the value given at the formal hearing is what your taxes will be based on for the year.

Note: You are allowed to sit in on formal hearings. I would recommend doing this if you want to better prepare for your own hearing. The Appraisal District has NO WIFI. Waiting times in 2018 were 2-4 hours. If you do a formal hearing bring 5 copies of your protest packet.

See You In Court

Tips to creating a great tax protest.

Get ready to say, what the f*ck, because this is about to blow your mind. Everything you thought you knew about property value is probably correct. However, the city doesn’t agree with you. But, that’s okay because as long as we know how they perceive value, we can use that to our advantage. Just like any negotiation situation, we have to understand the other side’s position.

First, you need to review the eFile Evidence Packet, which can be found in your eFile portal under CAD Documents. This packet explains the method of comparison used to determine the value. This is known as a Comparison Grid and there are two of them: Equity Comparison Grid and Sales Comparison Grid. Equity Comp Grid uses the median of 10 properties in the neighborhood and the Sales Comp Grid takes the median of the best 5 comparable properties that have sold since January 1 of the previous year. If you bought your home last year then you might only see the Sales Comp Grid.

Choose at least 2 comparable properties within the same neighborhood code that match as many of the 6 conditions below. The neighborhood code is listed on TravisCad profile and on your Evidence Packet.

1) Class– properties are given a class rating number based on the quality of construction

  • Use comps with similar exteriors (Hardiplank, stucco, wood frame, masonry etc)
  • Must be the same property type- single family home can’t be compared to a condo

2) Market Value– The price the home would sell for on the open market (based on sold comparable properties)

  • Use your Lender’s appraisal from when you bought the home or proof of the purchase price (whichever is lower).
  • If there is no recent sale for a comparable home in the neighborhood, argue for last year’s property value. You can try arguing a depreciation in value if there have been ongoing repairs like foundation, roof, pests, hvac, etc and bring photos or receipts as proof.
  • You must use comps that have the same number of stories and built around the same timeframe. Sqft and the number of bedrooms/bathrooms are NOT a strong indication of value to the City.

3) Land and “SITUS”– refers to land size by acreage and the physical location of the property

  • It’s supposedly very difficult to challenge land value. The City applies the same land value across all lot sizes (I know, WTF!). So regardless if your lot is .09 or .25 acres, the land value is the same. Some neighborhoods have tiers for land adjustments so check the Evidence Packet on that. You can challenge value if the land has an easement (drainage, electrical, driveway etc) or there is a limitation on the functionality and usability of the lot such as rough topography, floodplain (use GIS map) or heritage trees limiting your ability to add sqft.
  • The best thing to challenge is the location of the property- does it back up to commercial property, a highway, located on a busy road, or any other undesirable features? Provide photos.

4) Condition– overall condition; excellent, good, average etc

  • It is very difficult to argue the quality of improvements and construction. If you go this route, be sure to have photos noting defaults of the condition of the home as compared to the homes in the Comp Grids. Use the condition guidelines listed in the Evidence Packet

6) Market Leveler– refers to non-HVAC area details like porches, garages, carports, fireplaces, pools etc

  • The City will make adjustments if the comparable properties do or do not have these features- so you should do the same. If the comps you choose have garages or pools and yours do not, then argue for a lower value.

A few more tips:

Protest the comps or adjustment amount for the comps used in the Comp Grids. For example, the neighbor’s porch is screened in and freshly painted, and your porch is 20 years old with no updates (bring photos).

Bring in Pending Comps that can’t sell.

Check and make sure there wasn’t an error on your value. If you have a homestead exemption, the City CANNOT raise your value more than 10% each year.

Suggest a value. Be reasonable and accurate- the likelihood of success by lowballing is low.

Don’t talk about how you can’t afford the taxes. Don’t complain. Everyone pays taxes so don’t play the “woe is me” argument. Come with facts.

Use TravisCad and the GIS map to find similar homes in your neighborhood with lower market value to protest against the Equity Comp Grid. Since the market is hot, it’s difficult to use recently sold comps.

Protesting Property Taxes Flowchart

property tax system
tax calendar phases

Have a question? Email me!

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