** Updated Post: This post has been updated with new information.
Just when I thought I was done thinking about taxes, I received a notification from the county that my home appraised value had gone up. This meant that my property taxes for the year were going to follow suit.
In fact they assessed my home’s “market value” at a 20% higher rate than prior year. This kicked in an appraised value cap of 10% due to my Homestead Exemption. This basically means that my actual property taxes for this year will “only” go up by 10% instead of the 20% based on the market value.
By the way, “market value” in Texas as assessed for property tax reasons, is not an indicator of what a house is really worth.
As I pointed out in our 2017 Expense Budget, property taxes are ~$9,000 per year, accounting for almost half of our bronze package lifestyle expenses. Relative to my overall expenses, an increase of ~$1,000 per year in expenses is big enough to get my attention.
Historical Property Tax Assessed Values
Here’s a snapshot of my property’s assessed values since I’ve owned the house. And I do own it!
In the 8 years above (which excludes this most recent increase), I’ve managed to keep the market value of the house within 10% of the originally appraised value.
I accomplished this by protesting/appealing my appraised market values 4 out of the 8 years shown in the table. I was successful in reducing the value every time except for once.
There are a number of ways to try and reduce your assessed value…
DIY Approach to Property Tax Appeal
This is the most cumbersome, and time consuming way to go about appealing the assessed value of your home. There are a number of steps to keep in mind if you choose to go this route:
- Keep a look out for the assessment letter, or check online for updates.
- Be aware of timing and deadlines to file appeals.
- Familiarize yourself with your local appeal process.
- If you qualify for an exemption (homestead, age based, etc…) make sure the assessment is correct.
- Check out the assessed values of your neighbors. In Texas it’s all publicly available data.
- Make a list of all the things that make your house less desirable than comparable properties.
- Take pictures and estimate the impact of repairs and deficiencies.
- Go online or mail your protest/appeal form, along with all the supporting evidence.
- Be prepared to go to the hearing once it’s scheduled to make your case.
- Be prepared to deal with individuals who may be completely disconnected from reality.
It’s important to understand that assessed values made by local appraisers are complete guesses in many cases. They obviously have no access to the interior of your home, and often do a “drive-by” appraisal at best, and a “mass” appraisal at worst.
If the assessed value is completely off base, you may have some luck just contacting your local appraisal district and finding out who the appraiser was. Contact them directly and politely present your case, to see if they’re willing to simply make an adjustment on the spot.
Outsourced Approach to Property Tax Appeal
Thankfully, there are alternatives to appealing your assessed values beyond the DIY approach. There are a number of companies who offer services geared towards reducing the value on your behalf.
After going through the process myself, I decided to outsource the appeal to these companies.
I used two different ones in the past based on their fee structure, and have settled on one that I will be using for this year.
They both follow the same process, as most other companies do:
- Sign up for their services and sign a contract that releases them to represent you as an agent.
- Make sure you do this ahead of any deadlines.
- Send them any supporting documents that could help make a case.
- They will perform a detailed analysis of the property.
- They’ll file all the necessary appeals and paperwork with the appraisal district.
- They’ll show up to the hearing and make a case to reduce the appraisal value.
- Once the hearings are over, they’ll notify you of the results.
The main difference I’ve found with these companies is the way they get compensated for their services.
Keep in mind that my property tax rate is roughly 2.5%. This means every reduction of $10K in assessed value yields a savings of $250 per year.
One of the companies I used charged a flat fee regardless of results, at a rate of $295. This means they would need to be successful at reducing my appraised value beyond $10K for me to get any value from the process in the first year.
I used them shortly after I bought the property with less than impressive results. Although they managed to reduce my appraised value, it wasn’t lowered enough to justify their fee.
The second company I used had a different fee structure. They do not collect any fees unless the hearing results are positive. Their approach is to split the savings associated with a successful hearing.
For example if they succeeded in reducing the assessed value by $10K, yielding $250 in savings in property taxes, they would get a portion of those savings as their fee.
The split varies based on company. I negotiated a 60/40 split in my favor with this company, which I felt was fair.
I prefer this approach much better, since I effectively have nothing to lose.
Is Appealing Worth the Hassle?
Only 5-10% of homeowners actually take the time to appeal their taxes. Many people simply forget to do it. It’s not surprising since you only have roughly 1 month to file a formal intent to appeal, at least in my county.
It’s also perceived as a difficult and sometimes pointless exercise, not really worth the hassle.
You can count me in the minority of people who believe the hassle is worth the effort. By restricting the assessed value using appeals I’ve estimated a savings of $6,000 in property taxes over the years.
You might say that I’m potentially leaving money on the table using the Outsourced approach vs. the DIY approach. However, I believe these agencies are more successful than individual property owners because the appraisal district treats them differently at the hearings.
It’s easy to get personal at those hearings, and all it takes is a loss of patience or overt frustration to annoy the hearing board. The agencies on the other hand often lump comparable properties together and get a mass reduction from the board with no emotion and less time.
I used the same company to protest my taxes again this year. I heard that many more people around my neighborhood were upset about the most recent tax increases, and planned on protesting it.
I expected a lot more push back on the appraisal district than past years. A set of neighbors even pooled their efforts together this year and came up with very detailed arguments against the increases using valid data. They even invited me to participate, but I had already committed to using my tax appeal service.
This was a good opportunity to compare the success of individuals in my own neighborhood versus the use of a tax appeal company. In the end it didn’t matter.
My tax appeal company informed me that they weren’t successful in lowering my assessment, and none of the neighbors who took the DIY approach succeeded either.
Since I was copied in on all the e-mails from my neighbors, I saw how much effort and time they spent preparing for the appeals. My only comfort is that I didn’t waste the same amount of time they did, since I used a service instead.
This year also proved that when a city is dead set on increasing their payrolls, they’ll push it through regardless of the underlying data. Time to increase my budget by $1k/year going forward. Shadow inflation is a bitch!
I plan on offsetting the cost by increasing my investments in crowdfunding going into next year.
Since I’ve moved to the neighborhood, I’ve only seen city services decline over the years. Inflation has been fairly muted during this time, and I’ve been feeding the system as expected.
It makes me wonder where the extra money is being used, especially since my local public school is not benefitting from any of these increases. Meanwhile the city mayor’s $2.3M home is assessed with no increase.
The money is clearly being used ineffectively, and there’s plenty of mismanagement going on. I would rather take the savings from property taxes and inject them directly into my local school system. Which is exactly what we’ve been doing over the past few years.
Readers, do you protest/appeal your property taxes? do you use the DIY approach or outsourced approach? how successful have you been? Share your comments and thoughts below!