Wednesday, November 25, 2015

Texas Property Tax Protest

Uniform and Equal Appraisals

Equity Approach

Unequal Appraisal



Texas Property Tax  Code Sec. 42.26

        42.26.REMEDY FOR UNEQUAL APPRAISAL.  
          (a)  The district court shall grant relief on the ground that a property is appraised unequally if:
              (3)  the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.
             

For example, suppose you want to value a condominium in a building with a number of units of similar square footage, age, date of sale and floor location and the primary differences are interior features and amenities. By pairing a few assessed values, you can see differences in the values for crown molding as well as values for an upgraded kitchen. If the first (1) condo is assessed for $375,000 with crown molding and an upgraded kitchen, and the second (2) is assessed for $370,000 with no crown molding but has an upgraded kitchen, and the third (3) condo assessment is $340,000 with no upgraded kitchen and no crown molding, while the fourth (4) assessment is $345,000 with no upgraded kitchen but with crown molding, and finally the fifth (5) condo is assessed for $380,000 has crown molding and upgraded kitchen. You would match the first and second for a premium of $5,000 for crown molding being the only difference. You would match the first and fourth for a premium of $30,000 for an upgraded kitchen being the difference between them. You then would match the first and third for a premium of $35,000 for crown molding and an upgraded kitchen. Finally, you would match the second and third for a premium of $30,000 for an upgraded kitchen. An upgrade kitchen would be assessed at $30,000 and crown molding at $5000.


Your condominium has neither crown molding nor upgraded kitchen. An appropriate adjustment for the assessed properties would be as follows:  #1: $375,000 -$5000-$30000=$340,000; #2:$370,000-$30,000=$340,000; #3: $340,000; #4: $345,000 -$5000= $340,000; #5: $380,000 -$5000-$30000=$345,000. The middle number is $340,000, which is the median. So now you have a “reasonable number of comparable properties”  “appropriately adjusted” meeting the above requirement for relief.  If your property is assessed at $380,000 and you have no crown molding or upgraded kitchen, it appears $340,000 would be more reasonable, remember that it does not matter what the comparable sales indicated for market value, even if it is $400,000. If the ruling is in your favor on an unequal appraisal, your assessment will be reduced. This can be found in the State of Texas Constitution. This approach is to guarantee that similar properties are assessed the same; all will be uniform and equal.  Most all of the central appraisal districts(CAD) have available the assessed values of properties in an advance search, along with the information on the square footage, pool, patio, age, lot size, etc, and their assessed values used.  Or if more details are desired local Realtors can search for the sold detail sheet to show interior features when it was listed or sold.  This is a little work, but rewarding.  Most tax rates are close to 3%, so you save $300 for every $10,000 reduction. This example would save $40,000 off of the assessed value  X 3%=$1200.00. The above method is just one approach, but should give you a good idea of how adjustments are calculated.

“The arbitrator, like appraisal review board members, must make a determination of value. If unequal appraisal is claimed, statutory requirements must be followed to make that determination. If a property owner claims that the appraised value of his or her property is greater than the median appraised value of comparable properties, the statutory formula for determining the value must be followed. The value can be reduced if the appraisal district cannot establish that the appraised value of the property is equal to or less than the median appraised value of a reasonable number of comparable properties appropriately adjusted. Therefore, to determine an unequal appraisal claim based on median appraised value evidence, an arbitrator must do four things: 1)consider the size of the sample to make sure that it is a reasonable number; 2)determine comparability of the properties in the sample; 3)consider whether or not value adjustments, if applied are appropriate according to appraisal standards and the judgment of the property owner or expert; 4)and ensure that the median is calculated correctly.”

To find the Median, place the numbers you are given in value order and find the middle number. Example: find the Median of {12, 10, 13, 17, 14, 9,15}. Put them in order: {9,10,12,13,14,15,17) The middle number is 13, so the median is 13.  If there are two middle numbers, you average them. Five to nine properties should be okay, but it will depend on how many choices of similar properties exist in your area. I will post commercial properties protests and the Uniform and Equal approach soon.

“If a conflict exists between taxation at market value and equal and uniform taxation, Equal and uniform taxation must prevail” - The Court of Appeals of Texas, Houston (14th District).

Richard A. Skotak, Broker Associate 
Texas Arbitrator ID # 32020647007
rskotak@sbcglobal.net

Tuesday, November 10, 2015

Who Are My Neighbors?

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