Property Tax Appraisers Can Blow Me

Over-appraisal of homes by HCAD (Harris County Appraisal District) isn't a new problem. As far back as the year 2000, former State Comptroller John Sharp, speaking to the League of Women Voters asked: "In the last six years around Texas, where did all the new property-tax money come from? 19% came from increases in tax rates; 81% came from increases in property valuation. The various Review Boards that appraise property values, he said, "are appointed by the folks who get the money, not the folks who give the money”.*1

That in a nutshell explains the dynamics of property tax appraisals: a cozy arrangement that results in a whole lot of featherbedding, and thousands per year out of your pocket.

We've been sold a bill of goods about the virtue of ever-escalating property tax values. Sure, that high valuation allowed folks to get a second mortgage or do a refi, leaving them flush with cash, but where are they now that property values have crashed, upside down on their loans and with their houses unsellable? It's a fool's bargain, and HCAD has been the biggest player in jacking up the valuations that made all the real estate speculation possible in the first place.

High property values aren't just bad, they're phony. It makes no more sense for the value of a home to increase 10% per year than it does for the value of a car to increase 10% per year. The big difference between a home and a car, of course, being that Harris County can't collect taxes off the value of your car, and thus has no reason to inflate its value.

I'm no fan of high property taxes (or any other type of taxes) because I'm no fan of the greedy politicians and other public servants that prosper off of them. Left unchecked, they are primarily responsible for the real estate bubble, never so evident than in their insane and totally unjustified increases for 2007 and 2008. John Sharp was spot-on in calling attention to the problem way back in 2000. Surely the Great Recession we're all suffering through is proof positive of that.

So, what to do?

First, a few facts:

- In 2001, Harris County's population was 3.4 million. In 2009, it stood at just over 4 million, an increase of about 20%. In that same period, Harris County spending has grown from $790 million to $1.32 billion. That's an increase of 68%, more than triple the rate of population growth. Cy-Fair ISD budgets have increased even more dramatically. In that same period, enrollment increased around 50%, from 71,000 to 105,000, but spending increased more than 100%, from under $300 million to over $600 million.

Bottom line, they rode the real estate bubble to hyper-inflate county government. No wonder they jacked your property values with little or no consideration of the fairness or ethics of doing so.

- Less than 15% of all TOP residents protested their taxes in those years.

- Appraised values for homes in TOP are all over the map. There is very little consistency in appraised values between very similar homes. The reason for this is that HCAD's strategy has been to hammer everybody with increases. The ones that protest get lower valuations. Those that don't protest, don't get lower valuations.

- HCAD raised taxes on our house an average of 5% from 2002 through 2006. They tried to raise them 10% in 2007 and 2008 - in the middle of the real estate bust. We protested our taxes in 2007 and 2008, and although we own one of the newest houses in TOP, our appraised value is at the median for the neighborhood, with a value of $186,000.00. In 2009, there was no proposed increase on our valuation.

- If we hadn't protested HCAD's assessments, our home would be appraised at over $260,000.00.

HCAD Secrets:

- You can get a reduction just for filing the protest. Based on my personal experience, if you take ten minutes to file the protest, you can have your valuation reduced at least 10% every year.

- You should be able to get a large reduction in your property value even if HCAD does not attempt to raise your rates. Use their unfair assessments from 2007 and 2008, when they jacked up values even as real estate trends showed housing values plummetting.

- HCAD has no firm basis for how they appraise your property. They attempt to compare your house to the profile of a similar residence, but it's very basic, and frequently flawed. If you do research on just a couple properties in your neighborhood with lower appraisals and claim that your home ought to be similarly appraised, they do not have the resources or the will to refute you.

- HCADs assumptions for increases in valuation are mostly fiction. Not once have they been able to show me where increasing home values in our neighborhood were based on any increase in market value.

- HCAD deals in Bad Faith. This one is a no-brainer. Were it otherwise, how could you get a reduction in your assessment just by showing up? HCAD counts on weary homeowners too tired to fight. It's a war of attrition. They're getting paid to show up; you're not.

Tips:

- Appealing your appraisal is easy. File your initial protest through "iSettle", HCAD's on-line tax protest link: http://www.hcad.org/. This puts HCAD on notice that you are protesting your valuation. It also puts the ball in their court to negotiate with you.

- There's four steps in the process: 1) file the appeal; 2) meet with Appraiser; 3) meet with Appraisal Review Board; 4) Arbitration Hearing or District Court. Here's the link that describes the process: http://www.hcad.org/pdf/resources/taxpayerremedies.pdf

In most instances, you'll never have to go farther than Step 3. Given the mood of taxpayers today, you might not have to go past Step 2 in order to get a satisfactory reduction.

- The first visit is with an Appraiser who has to justify your valuation vs. other similar properties. These folks are underequipped to deal with a motivated property owner. Go to the meeting with the Appraiser, even if you have a professional representing you. There's just nothing like having to stare a victim in the eye to put the wolves at a disadvantage.

- Pick just one or two properties in your neighborhood that appear to be similar to (or better) than yours, yet have lower valuations. Document those for the appraiser. Here's the link to do the research: http://www.hcad.org/records/Real.asp?search=addr. You can pull up the values of any street in the neighborhood or any in Harris County for that matter.

- NEVER settle for what the Appraiser offers. They have guidelines to live by, and those guidelines from HCAD are designed to offer the minimum and wear you down.

- The next step is to visit with the Appraisal Review Board, a three person panel that will try to give you the bum's rush. Be firm. If you aren't satisfied with their offer, tell them that you are willing to go to Arbitration, essentially a court hearing: you the property owner vs. HCAD.

- Hire a Specialist if you're not up to doing this yourself. They charge less than $100 to represent you, and their fee is typically a percentage of the first year's savings.

In 2008, I negated a 10% increase and negotiated a 20% reduction in my property values - over the phone. One five minute telephone call. It was clear from the conversation that the appraiser was reacting to a lot of popular anger by property owners over HCAD's unjustified increases of years' past.

One final observation: I don't believe appraised value by HCAD will affect the market value of your house if you want to sell. Prospective buyers are going to pay based on the value of your house and its amenities and the quality and location of the neighborhood. Bottom line, a low tax rate is going to INCREASE the market value of your house, not lower it.

Good luck with Tax Year 2010. HCAD isn't likely to raise your rates much, and might even offer to lower them, but rest assured, they're not going to offer anything near what is fair. I'd start planning my tax protest right now.

*1 http://www.hcadtea.org/Who_Can_We_Trust.htm