Property taxes are a substantial expense for Texas homeowners,
averaging about $3,600 annually. To reduce this expense, property
owners should annually review and consider appealing property taxes.
While there is no guarantee that an appeal will be successful, a recent
survey conducted by O'Connor & Associates indicates that 70% of
property tax appeals are successful.
Since the mortgage company
typically disperses payments, property taxes tend to be a stealth tax.
Although the homeowner writes a check, including taxes and insurance
monthly, the property tax component is not evident. The property tax
component can become quite evident when the homeowner is asked to fund
a deficit in the escrow account.
Although 70% of property tax
appeals are successful, only 7% of homeowners appeal each year.
Research indicates five primary reasons homeowners do not appeal:
1. The process seems overwhelming and they do not know how to appeal,
2. They do not think an appeal is likely to be successful,
3. They think their home's assessed value is below market value and there is no basis for appealing,
4. They do not understand they can appeal on unequal appraisal,
5. They are busy and do not want to set aside time, given the presumption that "you can't fight city hall".
Why appeal?
Consider
an appeal for a $150,000 house where the property taxes are reduced by
5%. This would reduce the assessed value by $7,500 and the property
taxes by $225, based on a 3% tax rate. Since the typical appeal hearing
takes less than an hour, these are meaningful savings for the time
involved. Regularly appealing your property taxes will minimize the
value, so you are assessed for less than most of your neighbors. Most
of the property tax appeals are resolved at the informal hearing, which
is the first step in the process.
How to appeal
The first
step to appealing annually is to send a written notice to the appraisal
review board (ARB) for the county in which your home is located. Even
if you have not received a notice of assessed value from the appraisal
district, file a notice of appeal by May 31st for the following reasons:
1. The notice of assessed value can get lost in the mail,
2. A notice of assessed value is not necessary unless your assessed value increases by $1,000, and
3. You should appeal annually
You
can file a notice of appeal by utilizing the Comptroller's form
available at www.cutmytaxes.com or by sending a letter to the ARB. The
letter to the ARB simply needs to identify the property being appealed
and the basis for your appeal. You should always appeal on both market
value and unequal appraisal. Since the appraisal district staff is
extremely busy during late May and early June, sending any data on the
value of your property tax is probably a waste of time. At the same
time you send your notice of appeal to the ARB, send a "House Bill 201"
request to the chief appraiser at the appraisal district. The House
Bill 201 request will provide you a volume of information at a modest
price.
Reasons for obtaining House Bill 201 information
Since
most homeowners are not familiar with House Bill 201, you may be
wondering what it is and when it became available. House Bill 201 is
the term used by property tax consultants to describe provision 41.461
of the Texas Property Tax Code. This section reads as follows: "at
least 14 days before hearing on a protest, the chief appraiser shall: ?
inform the property owner that the owner or the agent of the owner may
inspect and may obtain a copy of the data, schedules, formulas, and all
other information the chief appraiser plans to introduce at the hearing
to establish any matter at issue."
The
property tax code further provides the chief appraiser the right to
charge up to $15 for each residence, and up to $25 for each commercial
property owner for this information. However, there are limits on the
cost per page an appraisal district can charge. Practically speaking,
the maximum charge is $1 to $2 for a residence. In Harris County, most
homeowners can print this information from the appraisal district's web
site once an appeal has been filed using the "I file" system.
This
section of the tax code was added in 1991, but many appraisal districts
have attempted to ignore this section of the property tax code for
years and some still do. After discussing this section of the Texas
Property Tax Code on a radio show in 2005, several listeners called
back a week or two later to report certain appraisal districts were
claiming to be unaware of this section. When O'Connor & Associates
sent House Bill 201 requests to appraisal districts in 2005, some
called us and said "what do you mean you want our information, we plan
to use your information at the hearing to prove our value." While these
examples seem quaint and cute, it is surprising that 15 years after
taxpayer friendly legislation has been passed, that appraisal districts
are still ignoring property owners and tax consultants who ask for this
information.
There are at least seven reasons to utilize House
Bill 201 to obtain the information the appraisal district will use at
the hearing:
1. It is an effective way to obtain information regarding both market value and unequal appraisal for your property tax appeal,
2. You will receive the appraisal district's information regarding the
size, condition and other qualitative and quantitative data for your
house,
3. The information can be obtained for a nominal cost,
4. It is helpful to know what information your adversary will be able to use at the hearing,
5. Making the request limits what information the appraisal district
can present at the hearing. If you do not request their information
prior to the hearing, they can use any information available to them at
the hearing. However, if you request the appraisal district information
using a House Bill 201 request, they may only use information
previously provided to you,
6. If they do not provide you information on market value or unequal
appraisal in the House Bill 201 request, you win by default at the ARB
hearing, and
7. In many cases, the appraisal district House Bill 201 information clearly supports a lower value.
Preparing for the hearing
When
you receive the appraisal district House Bill 201 information, start by
reviewing the appraisal district's description of your home and ask
yourself these questions:
1. Is the year built accurate?
2. Are the qualities and amenities accurate?
If
the appraisal district overstates either the quantity or quality of
improvements to your property, this is an excellent means to reduce
your property taxes both for the current year and subsequent years.
Filing a 2525c Appeal
If
the appraisal district has overstated the size of your house by more
than 5% to 10%, even if you did not file a property tax appeal in prior
years, you should consider filing a 2525c appeal. This will allow you
to reduce the assessed value of your property for the current year and
for prior years.
Patrick
O'Connor, a designated member of the Appraisal Institute, is president
of O'Connor & Associates. The firm, in business since 1974,
specializes in real estate appraisals, research, and state and federal
tax reduction services nationwide. With offices in Houston, Dallas, Los
Angeles and Newport Beach, the firm employs more than 130 people.
Patrick O'Connor is frequently acknowledged by national publications as
a respected source of information on real estate. Visit http://www.cutmytaxes.com.
