Angela Chong, Other/Just Looking in 75201

I find many properties listed for about $100K OVER the assessed value by the city. Are the upgrades really worth that much? How much can we negotiate?

Asked by Angela Chong, 75201 Wed Mar 7, 2012

In Preston Hollow, I find that the school element is not as important because it is a neighborhood where most are expected to attend private schools. I do not feel that is a justified reason for the price hike. Why do sellers list the houses for so much over the assessed value?

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Taxable value and fair market value are 2 completely different types of valuations. Fair market value is based on the sale prices of other properties - not the taxable values of other properties. The State of Texas is a non-disclosure state as that relates to taxable value - appraisal districts have no access to what anyone paid for a property unless that buyer gives them the information, and most don't because that wouldn't be in their best interest. Buying based on tax value is a flawed purchase model - it doesn't work for a great number of reasons. Appraisal districts are capped at the amounts they can raise a taxable value over a given period of time and appraisal districts assign taxable values once each year. Fair market value fluctuates week to week, month to month, and sometimes even daily - based on what has sold in the recent past, based on what's traded in the free marketplace. Your question is why do sellers list houses for so much over the assessed value? The answer is because the assessed value is not what the property is worth in the purchase market - it's what their taxes are based on. That doesn't mean a seller hasn't overpriced their property - but it does mean that trying to base a purchase offer on a tax assessment is a fight that most buyers will lose over and over again.
2 votes Thank Flag Link Wed Mar 7, 2012
There's a difference between the city tax appraisal and current market value. That's why a realtor does the sale comparables for the neighborhood which is the current value. Sellers sometimes aren't realisic in what they want as opposed to what they can get in the current market, sometimes pricing themselves out of reach. Also some upgrades don't necessarily raise the value either it just makes the place look nicer. So if you're close in price you can negotiate.
2 votes Thank Flag Link Wed Mar 7, 2012

You have some great information from my colleagues. Some upgrades are worth more than others, but assume that you already know that. The listing price of a home should be based upon what other "comparable" homes in the area are selling for, not what the assessed "taxed" value of the home is. Sometimes that is below tax value and sometimes above tax value, and sometimes it is completely out in left field because a seller is determined to list at what they want and not what a Realtor or market data is suggesting they should list at. So it could be that the home you are interested in, is grossly overpriced because of the last scenario that I mention. As far as how much you should negotiate, that question is really unanswerable because we don't have enough information. My advice would be to look at homes that are comparable to the one that you are interested in, in the same neighborhood, and offer the same amenities. The sale prices of those homes will supply you with negotiation information. Your Realtor should be able to give you this information and supply you with an estimated market value on the home you want to negotiate on. Are the upgrades really worth that much? The comparables will give you your answer. Good luck and happy house hunting!!

Jackie Rankin
Tru Value Realty
1 vote Thank Flag Link Thu Mar 8, 2012
Tax value is no indication of market value in my opinion.
You can see my long blog post on tax values here.

Remember the tax appraiser has used a computer generated model. They've never seen inside the home or probably even the outside of the home.

Most people want high sales prices, but low tax values and will do everything they can to get the tax value lowered. Depending on how long and how much they fight, virtually the same home on the same street can have widely different tax values. As a realtor I don't really care about tax values in most instances.
1 vote Thank Flag Link Wed Mar 7, 2012
Bruce Lynn, Real Estate Pro in Coppell, TX
If the homebuyer challenges the assessed value, they can get the value lowered quite a bit and that is not related to the actual appraised market value of the home. You can challenge the assessed value based on unequal valuation of other homes in your neighborhood.
1 vote Thank Flag Link Wed Mar 7, 2012
So you purchase a home for $200,000, let's say, and the appraisal comes in at $200,000 after analyzing current market sales data, but the appraisal district only has it at $100,000. Are you going to call the appraisal district and ask them to raise your value so that you can pay higher taxes? Of course not.

Barbara Coker
Licensed Mortgage Loan Officer
100% Home Loans ALL Over Texas!
Web Reference:
1 vote Thank Flag Link Wed Mar 7, 2012
Excellent answers from all who contributed!
0 votes Thank Flag Link Thu Mar 8, 2012
Also tax value vs sales price either higher or lower is no indicator of a good or bad deal alone.

Some sale much above tax value and some way below.
0 votes Thank Flag Link Wed Mar 7, 2012
Bruce Lynn, Real Estate Pro in Coppell, TX
And yes you are also correct, some upgrades do NOT add any value at all and or barely equal the cost of the upgrade itself.
0 votes Thank Flag Link Wed Mar 7, 2012
No and yes. It depends on the house and what exactly is upgraded. You can never really go by tax records. You need to pull up comparables that's what the listing price is always based off. Give me a call I can walk you through it. 972-832-2755
0 votes Thank Flag Link Wed Mar 7, 2012
This is a tough question to answer. The city can only raise property taxes so much and so fast, especially when these properties have a home stead exemption and or other exemptions filed. You are also talking about areas that are land locked and there are no vacant empty lots to continue to build on. So many older homes get torn down and rebuilt with basements and 2 or more stories on top. They double and or triple the sq footage and get a higher price for the home in the end. Land value is the key with most of the properties being listed for more than the assessed value. What the city values the property at and what the buying/selling market determines the value are 2 different things. Just as in many areas homes are being sold on a short sale for thousands below Tax Value.
0 votes Thank Flag Link Wed Mar 7, 2012
Barbara, your example is very simplified and not helpful for buyers.

Perhaps other agents can help....
A property I reviewed showed that it has consistently been assessed at same value for recent years. The current seller did not make that mistake of not reviewing information. There may have been some upgrades but I don't think it can worth $100K. Can buyers in this market really overprice their homes that much and be successful in selling?
0 votes Thank Flag Link Wed Mar 7, 2012
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