Tax Appraisal Values in Texas

I notice lots of buyers want to depend on tax appraisal valuations as an indicator of value for a home.   Tax values are just that....the value the tax authority has placed on the house as a determiner of how the taxes will be calculated.   In my opinion it often is not related in almost any way as to the market value of a home.   Market values can be and often are significantly different than tax values.   They can be much more than tax value or much less....I have personally seen the tax value as much as 40% less and as much as 20% over the market value.

There are many many different reasons for the differences in values.   One reason could be the valuations of the homes in the area.   For example a new house built in an old neighborhood.  Another reason is the success of a homeowner who fights their tax valuation every year.   I've seen these values as much as 20% below the neighbors with the same size, age, and homebuilder.   I've also seen homes with low tax valuations that have never been on the market or have unusual building materials.   Take for example a home with a shingle roof versus one with a metal roof.   Another example might be a home with standard or no appliances versus one with high end restaurant type appliances.   Typically the tax authorities aren't able to distinguish the differences.  

There are even examples of multimillion dollar fights for tax valuations.  Look up articles on the Gaylord Texan Resort in Grapevine which at one time was fighting over $100,000,000 in tax valuation.   There are also exemptions that can keep values low, such as agricultural exemptions.   That's why you'll often see a small herd of cattle grazing on a corporate campus.

The lesson for buyers is don't depend on someone who has never seen the inside of the house, probably has never been in the neighborhood, and perhaps has never even been in the city to set a true market value for the home based on current market conditions.   Paying less than tax value by no means ensures you of a good deal any more than paying over tax value means you got a raw one.  

Tax districts set values typically in the Spring each year, based on data that may be months old.
I also often wonder if they don't back into the number based on the proposed budget of the county commissioners.   I can just hear the talk in the back room of....based on this budget....we need X amount of property tax revenue, and therefore we need y% of value increase to hit that.....out come the valuations in a down economy that have increased.

There are other important factors that buyers should consider.   One is if the tax value is much lower than the market value or purchase price.   There is a good possibility the tax valuation will go up in the following year.   Even when increases are capped by law, the caps often disappear with a change in ownership.   If the tax valuation is too high, it might pay to fight the valuation during the next valuation and dispute period.

If you are in the Dallas-Ft Worth Metroplex area and have a question about your property tax valuation or want a recommendation for a professional valuation fighter, please contact me via email and I will be happy to discusss this with you.