Protesting my 2023 appraised value on investment property
Hi guys, I'm a new real estate investor and had just received my Notice of Appraised Value for one of my properties. And I must say it's a eye-opener for sure. For some perspective, I had closed on the property in August 2022, hence the assessed value has been finalized for the year and it was a primary residence so there was homestead exemption on the 2022 appraised value. Believe it has a 10% increase cap yearly. Now that it's classified as an investment property, it no longer can claim homestead exemption and as a result the proposed appraised value jumped off the roof!
For example, in 2022, the taxable value was $317,201 vs. 2023's $455,444. A whooping 44% year over year! My purchase price was $423k and the time I bought the place was basically the peak of the housing market. I doubt I will be able to sell my house at the new valuation it was assessed at. That said, I am preparing for a protest to the county's appraisal district. Would like to ask tips from those who had done it before and learn what "evidence" should be included to make my case stronger for a lower appraised value. Or alternatively, hire experts (property tax solutions) to help with this. Most of them as per my research takes a % of the savings it was able to achieve through their protest efforts.
Appreciate you guys in advance :)
Did you get full copy of the appraisal?
All the details you mention have zero influence on a residential appraisal.
Property is in Dallas?
Comparable sales are what is used.
You need 3 comps with similar square footage that closed with a loan in the past two months. Properties should be in the same tract, or you need to know how to adjust them for condition, age, view, upgrades, amenities, and 20 other things.
You need sale date, value, upgrades...
Get a Realtor to help you
You want them to lower it then tell them all the details wrong with your house verses' the comps you found.
In writing, with facts, check and see what square footage they claim.
These things do not include in your rebuttal:
homestead exemption on the 2022 appraised value. Believe it has a 10% increase cap yearly. Now that it's classified as an investment property, it no longer can claim homestead exemption and as a result the proposed appraised value jumped off the roof!
@Jack Lee I have property in Dallas county and had this happen to me last year. I was unsuccessful in my protest but in talking to other RE investors around Dallas and Tarrant County, the sweet spot they've found when protesting is trying to get the taxable value down 2.5-3%. You're not going to get the taxable value down to your purchase price. Appraisal districts are greedy for the tax revenue. Knocking off small chunks at a time is better than nothing.
Quote from @Caroline Gerardo:
Did you get full copy of the appraisal?
All the details you mention have zero influence on a residential appraisal.
Property is in Dallas?
Comparable sales are what is used.
You need 3 comps with similar square footage that closed with a loan in the past two months. Properties should be in the same tract, or you need to know how to adjust them for condition, age, view, upgrades, amenities, and 20 other things.
You need sale date, value, upgrades...
Get a Realtor to help you
You want them to lower it then tell them all the details wrong with your house verses' the comps you found.
In writing, with facts, check and see what square footage they claim.
These things do not include in your rebuttal:
homestead exemption on the 2022 appraised value. Believe it has a 10% increase cap yearly. Now that it's classified as an investment property, it no longer can claim homestead exemption and as a result the proposed appraised value jumped off the roof!
I appreciate the info, I had reached out to the realtor that I've worked with on this purchase. Will be sure to only state facts!
Quote from @Kevin Von Storch:
@Jack Lee I have property in Dallas county and had this happen to me last year. I was unsuccessful in my protest but in talking to other RE investors around Dallas and Tarrant County, the sweet spot they've found when protesting is trying to get the taxable value down 2.5-3%. You're not going to get the taxable value down to your purchase price. Appraisal districts are greedy for the tax revenue. Knocking off small chunks at a time is better than nothing.
Will be sure to keep that in mind. This is definitely something I gotta keep in mind when underwriting the next deal, the steep property taxes increase once homestead exemption no longer plays a role in the next tax year. Thanks!
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One idea is to use your bank appraisal if you got a loan and had one done at the time of purchase. Normally they will at least push the value down to that appraised price.
If you are in Dallas, one thing you can do is pull real comps with pictures and if your home has flaws compared to other homes, like high traffic area, foundation issues, old windows, and the like, then perhaps you can argue the comps they have used. Also for example if you had to trash the house out after a renter was in it, or if you bought a fixer, show them those pictures. Show them the pictures of the grass 2ft high.
I would also go IN PERSON, as far as I know it is NOT available online and pull what they call the run sheet. Make sure that run sheet matches what you have. I see plenty of mistakes on them. Size, beds, baths, garage #, and everything else the put on that sheet. Having it accurate in your favor can make a difference sometimes. Someone on BP just posted their home shows 300sqft larger on the tax roll than their bank appraisal. That could be an issue at $200-$300/sqft or whatever your home prices out.
If you go in person, I often hear the board reps say they want pictures to prove why your home should be valued less. So give them what they want.
Also you should ask for an evidence package of what they want to use as comps. I often pick those apart. Sometimes they will use homes from different school districts, different neighborhoods, foreclosures, and so many other bad comps. One year when I got about a $50,000 reduction, they had used homes that were in no way similar to mine, because that's all they could find in MLS.
I've seen boards go all over the place with what comps they will allow or not allow. The law says it should be the value as of January 1st, 2023....I've seen some say no comps sold after that. I've seen some say comps no more than 3 months on either side of that date. I've seen some say no foreclosures? Last year when I was in front of one board I put them on the spot before we got started and asked what date range they would allow comps? So I was able to eliminate most of the CAD comps he was using.
Also if they don't give you their evidence, they CAD person can't use it against you. I've been lucky and unlucky this way. When I quoted and distributed the law, one board didn't like it and wanted to reschedule the hearing. Also their computer operator wanted to testify against me and explain stuff...but he wasn't sworn in, so I challenged that. One struck off some of their properties they wanted to use as evidence.
One thing I feel is they are often totally unfair, cherry picking the highest comps...I used to be fair and really try hard to use similar comps...but I'm so jaded now, I typically just pick the lowest ones and use those. I don't think they've every agreed to use the number I come up with any way, so I'm just hoping for at least some adjustment.
Not sure if your county has automated adjustment, but if they do and you don't want to spend a lot of time, you can try that. I'm guessing you have to be close, maybe 3-5% discount to get auto approval, but not sure about that. You can also go 1 on 1 with an appraiser and see if they will give you what you want. That's probably worth a shot, if you don't like it, then you can go in front the board or board reps.
Good luck.
@Jack Lee This doesn’t help you now however for future deals you should be underwriting your property tax expense at the purchase price.
This will help the big surprise down the road. Especially now where some homes have doubled in price and are assessed closer to 2017 price.
The time and energy spent fighting the assessors isn’t worth it in my opinion. Been there done that.
Quote from @Bruce Lynn:
One idea is to use your bank appraisal if you got a loan and had one done at the time of purchase. Normally they will at least push the value down to that appraised price.
If you are in Dallas, one thing you can do is pull real comps with pictures and if your home has flaws compared to other homes, like high traffic area, foundation issues, old windows, and the like, then perhaps you can argue the comps they have used. Also for example if you had to trash the house out after a renter was in it, or if you bought a fixer, show them those pictures. Show them the pictures of the grass 2ft high.
I would also go IN PERSON, as far as I know it is NOT available online and pull what they call the run sheet. Make sure that run sheet matches what you have. I see plenty of mistakes on them. Size, beds, baths, garage #, and everything else the put on that sheet. Having it accurate in your favor can make a difference sometimes. Someone on BP just posted their home shows 300sqft larger on the tax roll than their bank appraisal. That could be an issue at $200-$300/sqft or whatever your home prices out.
If you go in person, I often hear the board reps say they want pictures to prove why your home should be valued less. So give them what they want.
Also you should ask for an evidence package of what they want to use as comps. I often pick those apart. Sometimes they will use homes from different school districts, different neighborhoods, foreclosures, and so many other bad comps. One year when I got about a $50,000 reduction, they had used homes that were in no way similar to mine, because that's all they could find in MLS.
I've seen boards go all over the place with what comps they will allow or not allow. The law says it should be the value as of January 1st, 2023....I've seen some say no comps sold after that. I've seen some say comps no more than 3 months on either side of that date. I've seen some say no foreclosures? Last year when I was in front of one board I put them on the spot before we got started and asked what date range they would allow comps? So I was able to eliminate most of the CAD comps he was using.
Also if they don't give you their evidence, they CAD person can't use it against you. I've been lucky and unlucky this way. When I quoted and distributed the law, one board didn't like it and wanted to reschedule the hearing. Also their computer operator wanted to testify against me and explain stuff...but he wasn't sworn in, so I challenged that. One struck off some of their properties they wanted to use as evidence.
One thing I feel is they are often totally unfair, cherry picking the highest comps...I used to be fair and really try hard to use similar comps...but I'm so jaded now, I typically just pick the lowest ones and use those. I don't think they've every agreed to use the number I come up with any way, so I'm just hoping for at least some adjustment.
Not sure if your county has automated adjustment, but if they do and you don't want to spend a lot of time, you can try that. I'm guessing you have to be close, maybe 3-5% discount to get auto approval, but not sure about that. You can also go 1 on 1 with an appraiser and see if they will give you what you want. That's probably worth a shot, if you don't like it, then you can go in front the board or board reps.
Good luck.
I appreciate the thorough response and I gained tons of knowledge from your response. I am in the process of drafting up quantitative as well as qualitative materials for my protest. I will be sure to update the thread on my fight with the appraisal district!
Quote from @Karen Bickford:
@Jack Lee This doesn’t help you now however for future deals you should be underwriting your property tax expense at the purchase price.
This will help the big surprise down the road. Especially now where some homes have doubled in price and are assessed closer to 2017 price.
The time and energy spent fighting the assessors isn’t worth it in my opinion. Been there done that.
Hi Karen, yes that is definitely the key for the next deal where I underwrite the property taxes component using the purchase price vs. what was paid by seller. Big difference in property taxes assumption when any exemption is applied. Thanks again!
Quote from @Karen Bickford:The time and energy spent fighting the assessors isn’t worth it in my opinion. Been there done that.
It’s absolutely worth fighting if they are way high in their appraisal numbers. I fought 7 properties in central Texas last year and they lowered all 7 from $10,000 to $104,000 totaling $246,000. These tax assessors are just throwing numbers out and hoping people don’t protest.
@Jack Lee They might lower to what you paid for the property but they will never go lower. Get CMA's from your local realtor and protest. We just got last years protests settled in late December, starting to protest this years now. I had one property go up 76% and my realtor says he's seen lots of appraisals worse than mine. It's almost criminal what they are doing. Best of luck.