April 2021

Appraisal Districts May Inflate Your Market Value

Appraisal Districts May Inflate Your Market Value

  • There are generally three different methods an appraisal district will use to assess the market value of your property.
  • For income producing properties, the most common is the income method.
  • The appraisal districts will likely artificially inflate the value of your property by not fully recognizing your lost income. Its important to be prepared to fight back.

We are getting close to the protest deadline for property taxes here in Texas, with just a couple of weeks until the deadline to file the protest. This year, because May 15 is on a Saturday, the deadline to file a protest is May 17.

There is nothing more frustrating than getting that assessed value in the mail and seeing it went up 25, 50, 75%. Nothing can kill an investment as quickly as an out of control appraisal district can. As a result, we are going to continue to talk about different aspects of the appraisal process. Specifically, this week I am writing about how the heck the appraisal district even came up with that number. And how you can be prepared to fight back.

Methods for Assessing Property Values

I’ve talked about this before in this blog, but in Texas there are two main ways in which we protest the assessed value of a property –

  • Market Value
  • Equal and Uniform

We talked about equal and uniform in this blog two weeks ago. Today then, we are going to focus on the market value here.

Market value means the price at which a property would transfer in an open, arm’s length transaction. This is usually determined through three different methods:

  • Sales method – comparing the property to recent sales in the market;
  • Income method – for income producing properties, multiplying the net operating income by a cap rate to reach the market value; and
  • Cost method – calculating the cost of construction to determine market value.

As stated, for income producing properties, the income method makes the most sense. But what about this year? The pandemic drastically reduced income for many property owners. How will the appraisal districts calculate your assessed value?

Getting the Full Effect of the COVID Devastation

That question – how will the appraisal districts address COVID – has been on the mind of a lot of Texas property owners this year. We have not seen the appraisal district analysis yet so its hard to give a definitive answer to the question. But, based on dealing with appraisal districts in the past, I can make a good guess.

I suspect that the appraisal districts will not fully appreciate the dramatic decrease in the value of income producing properties. To artificially prop up the value, instead of using actual income numbers, they will likely boost the income to some fictional average market level. They will then divide that number by the cap rate to get an artificially inflated market value. From that number, they may give you a nominal reduction based on the lost income. Using this method, the appraisal districts will keep your market value artificially inflated.

Its very important to be able to combat this with a more accurate method. We think that the reduction for lost income should be recognized in the NOI calculation – thus getting the benefit of the cap rate multiplier. This will provide a more accurate picture of the devastation that COVID has wrecked on income producing properties.

Its important, therefore, to have a clear plan when you go in to protest your assessed values. Please give us a call at 512-614-0335 to discuss your protest so we know you are fully prepared.

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Time for Austin to Help Our Homeless Population

Time for Austin to Help Our Homeless Population

  • There are a number of propositions on the May 1 ballot in Austin.

  • For commercial real estate, the most important one is probably Prop B – which would reinstate the citywide camping ban.

  • While I think that we should pass the Proposition to reinstate the ban, that cannot be the end of our activism. We must take the next step and help find housing for our fellow homeless citizens.

Most of the Texans reading this blog probably know that most counties have released property tax appraised values by now. As we have been discussing – its property tax season. We will likely get back to talking about them next week. But this week we are going to take a break from that.

We are taking that break because there is a big election coming up in Austin and I think its important to discuss that. So that’s what we will do.

Propositions on May Ballot

On May 1, Austinites will (hopefully) go to the polls to vote on a number of propositions. As an alternative, early voting started on Monday, April 19. And during early voting, you can vote at any of the voting locations in the city.

There are 8 total propositions and many of them are extremely important. We will decide, for example, whether Austin will switch to a strong mayor system or whether we will add an 11th council district. These and the other propositions are all very important issues and I encourage you to research all of them.

But this is nominally a commercial real estate blog – not a political one. As a result, we are going to focus only on the one that most affects commercial real estate – Prop B.

The Importance of Prop B

So what is Prop B? As you likely know, back in mid-2019, Austin repealed its citywide ban on camping in public. The repeal of that ban has been a disaster for the City. As Mayor Adler now admits – its just not working.

Since the repeal, campsites have been set up all around town – including in some of the most desirable areas. And, allegedly, the homeless population has increased. Its just not a sustainable situation.

As a result, a group called Save Austin Now has gathered enough signatures to get a proposition on the ballot (Prop B) that would reinstate the citywide camping ban. If it passes, camping on public lands will again be illegal. Its unclear how the City Council will react if it passes, but presumably the tents will be taken down and the homeless population will have to disperse.

I believe that most people have empathy for Austin’s homeless citizens and want to help them. But allowing camping like it is now cannot be the solution to that issue. It raises the potential for danger in those camping areas and severely devalues the surrounding communities. It is just NOT a viable solution to continue like this.

As a result, I will be voting for Prop B and I hope you will join me in doing so.

Prop B Cannot be the Final Move

But that cannot be the extent of our work on this issue. I do believe we have to make camping in public lands illegal again. But we also need to find a safe, productive solution for our homeless citizens. If we do the first without the second, we will have failed. A friend of mine told me this week that he thinks “that homelessness is a blight on America as a whole, a problem that has been around forever, and it’s amazing that the richest nation in the world does not deal with this effectively.” He’s right.

We may disagree on how to help our fellow citizens, but not that we need to do it. I admit that I am not an expert in this area.

Recently Mayor Adler has talked about using some funds from the American Rescue Plan to help solve the homelessness crisis. And he has asked Travis County to chip in also. He has also talked about building 3000 units to house the homeless population.

In addition to those proposals, its important to look at the success that Community First! Village has had in Austin, as well as Haven for Hope in San Antonio. Both of these seem like great communities that have had very good success in helping people get off the street and into housing.

As I said, I do not know what the answer is – I’m not an expert. But I know what its not – allowing public camping. We, therefore, need to vote to approve Prop B on May 1. But we can’t stop there. We need to take the next step and help house our homeless citizens and solve this crisis. I hope to be part of that solution on May 1 – and starting on May 2 also.

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Commercial Real Estate Attorney | Bukowski Law Firm | Austin, TX

Protesting Unequal Treatment of Your Texas Property

  • The deadline to file a property tax protest is coming up – May 15, 2021.

  • When you file your Notice of Protest, make sure you protest the market value and unequal appraisal.

  • Under Texas law, taxation has to be equal and uniform. Thus protesting an unequal appraisal gives a property owner another way to fight the appraisal district.

Is everyone sick of property tax talk yet? This is no longer a nominal commercial real estate blog. Its all taxes all the time.

But seriously, it is property tax season. So once again this week, that’s what we will talk about. Specifically, we discuss filing a Notice of Protest form and why it is ESSENTIAL to protest the unequal treatment of your property taxes.

By the way, I shorthand often refer to this as “protesting your property taxes.” In actuality, you are protesting the appraised value of your property. And then that value is multiplied by the tax rate to get your property taxes owed. But its easier to just refer to that as protesting your property taxes.

Notice of Protest

As we have been talking about, the county appraisal districts are about to release 2021 appraised values any day. Indeed, at the time I am writing this article Harris and Bexar Counties have already released their’s. We expect the rest of the counties to follow any day. That means its time for property owners to file their protests.

The first step in doing that is to file a Notice of Protest with your local appraisal district. The form is fairly simple – you have to post your (or the ownership entity’s) name and address, as well as street address or legal description of the property, and the appraisal district account number. The form MUST BE FILED BY MAY 15, 2021. THIS IS VERY IMPORTANT.

The easiest and best way to get the information on the form is to go to your local appraisal district website and search for your property. All of the information will be there.

For example, on the Dallas County Appraisal District website, you can search for the property by the name of the owner. And when you bring up the record, it will give you the account number, legal description, etc.

You also need to check the reasons for your protests in the “Step 3” section. There are a lot of reasons that you may protest (for example if you have an ag exemption). But there are two universal protests that every property owner should check:

  • Incorrect appraised (market) value – When checking this, you are protesting that the appraisal district incorrectly assessed the market value of your property; and

  • Value is unequal compared with other properties.

Unequal Compared with Other Properties

So what does it mean that your property is appraised unequal with other properties? And how can that help you?

The Texas constitution states that taxation shall be equal and uniform. And from there, the Texas Property Code states that a property is appraised unequally if:

  • the appraisal ratio of the property exceeds by at least 10 percent the median level of appraisal of a reasonable and representative sample of other properties in the appraisal district;

  • the appraisal ratio of the property exceeds by at least 10 percent the median level of appraisal of a sample of properties in the appraisal district consisting of a reasonable number of other properties similarly situated to, or of the same general kind or character as, the property subject to the appeal; or

  • the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.

Thus if you have an apartment building built in the 1960s next to your neighbor who also has an apartment building built in the 1960s, the local appraisal district has to give a relatively similar appraised value to both. Obviously that value is adjusted for vintage, size, repairs, etc. But in general, they have to be taxed at a similar rate.

This is often the most effective way to protest your property taxes in today’s market. As you likely know, prior to the pandemic, property values in Texas were increasing. Thus market value analysis may not always be your most effective tool to protesting the assessed values. Instead, equal and uniform analysis is often beneficial in helping lower your assessed value.

So when you get those appraised values in the next couple of weeks, make sure you get your Notice of Protest form filed by May 15. And if you need help, please give us a call at 512-614-0335.

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tax - Commercial Real Estate Attorney | Bukowski Law Firm | Austin, TX

Essential Property Tax Preparation

  • Appraisal Districts have a lot more information about your property than they did even five years ago.

  • As a result, to get a reduction of your appraised value, you need to be prepared for your hearings.

  • There are many arguments you can make to the panel, but they will only be successful if you have data to support those arguments.

As we discussed last week, we are entering property tax season here in Texas. Its always an exciting and often frustrating time. While we wait for the appraisal districts to release this year’s appraised values (some – like Harris County – have already released its values), we want to talk about how to get ready for your hearings. Its extremely important to be prepared – but how do we do that? That’s what we address in this week’s blog entry.

Appraisal Districts have Extensive Information


We’ve talked about this previously, but if you want to get a reduction in the appraised value at your property, you have got to be prepared. That’s primarily because in the last 5-10 years, the appraisal districts have gotten a lot more purchase and debt information about private properties.

While Texas is a non-disclosure state, the appraisal districts have a lot of people working on researching property information. That includes reviewing property records for deeds and deeds of trust, conducting in person appraisals, and scouring private online portals like CoStar. They often misinterpret this data but they use it to much more aggressively set high appraised values. As a property owner, you need to be just as aggressive and prepared for your hearings.


What You Need to do to Be Prepared

This is likely to be a rough year for property owners in Texas. The market may be rising and, as explained above, the appraisal districts have a lot more information. We expect, therefore, that the appraisal districts are going to significantly increase the appraised values of most properties. It is possible to get these values lowered – but you have to come to the hearings prepared.

Its vital, therefore, that you are ready with analysis when you go to your informal or formal hearings. You should start preparing for your hearing as soon as possible. Your preparation should include the following:

  • Protest Market Value – You must make sure that you protest the market value of your property. One of your arguments to the board will be that the appraisal district has improperly appraised the market value, so when filing your protest, make sure you check the box to protest market value.

  • Protest Equal and Uniform – In addition to market value, you must also protest that your property was not assessed on an equal and uniform basis to similarly situated properties. The Texas constitution requires equal and uniform taxation of similar properties. If the appraisal districts do not adhere to this requirement, you may be able to get your values lowered.

  • Have data – The only way to get your assessed value lowered at a hearing is to show the panel supporting analysis that is backed by data. For income producing properties, that includes financials, rent rolls, etc. For partially completed properties, that may include cost of construction.

  • Other supporting data – Besides the financial data, you can also get your appraised value lowered by showing that there is significant damage or restrictions on the property. For example, if you have large easements or heritage trees, that can limit what you can do with the property and thus reduce its value. To convince the Board, you should start gathering pictures, invoices, surveys, recorded docs, etc.

  • COVID damage – Many income producing properties were severely affected by COVID. Like with other areas of your analysis, you can get a reduction in your appraised value due to the decrease in income. But you need to bring data to support the reduction.

  • Support for Exemption – Finally Last week we talked about getting a potential exemption from property taxes as a result of damage from the winter storm. To be successful, you will need to provide specific evidence to the board explaining what the damage is and how it reduced the value of your property.

Any Texas property owner knows that high property taxes can ruin an investment. Protesting these high values, therefore, is critical. To be successful in your protest, you need to be prepared and bring data.

If you have any questions on how to effectively fight the appraisal district, please give Bukowski Law Firm a call at 512-614-0335.

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