Wonder how the taxman figures out what your house is really worth? Join the club
They arrive in the mailbox every year, little brownish-yellow bombshells that can explode inside your household with a blinding fury. Lives are changed, tears are shed.
But they don’t come from that Unabomber copycat; they come from the Dallas Central Appraisal District otherwise known as your friendly, local tax assessor.
In Texas, which doesn’t impose a state income tax, property tax is the primary way localities fund their local government. And for that reason, they are at best a necessary evil.
But exactly how does the CAD go about deciding what an individual property is worth? Even Bob McCranie, a four-year real estate professional with William Davis Realty, can’t say for sure.
“Let’s say 10 people go to dinner and the cost of the meal is $100,” McCranie says by comparison. “Proportionally, your share of the bill is $10.” After all, that’s what’s required to pay the entire bill.
But what if one diner just had the soup, another the lobster? They’re shares shouldn’t be equal, or even comparable. But “that’s sort of how the [system] works,” McCranie says. “You’re house is worth 10 bucks to the appraisal district” because that’s what the city needs to meet its budget. The fact they don’t take anything out of your paycheck directly is small consolation for the beleaguered homeowner.
One thing many cities have taken to doing to slow the rising tax rates is to gain more people to tax.
“Garland, Carrollton, Plano they all did land-grabs,” McCranie notes. “Richardson even grabbed land in Collin County that just snakes up there. It’s all about gaining a tax base.”
That might work in smaller bedroom communities, but a house here or there won’t do much to alleviate Dallas’ gargantuan city budget. Which is why taxes go up but rarely come down. Some cities even take aerial photos, McCranie says, so they can see who has a swimming pool and make sure to add that to that asset value of the house.
The Catch-22 in property value taxation is that while a taxpayer may have value built into a house, it is not a liquid asset you can’t sell your bathroom to pay your tax bill. It’s an all-or-nothing proposition: Keep your house, bite the bullet and pay the taxman, or sell it and have no place to live.
But that doesn’t mean you have to take it lying down.
“Tax assessment rolls are the least reliable valuation of a property,” McCranie says. “But most people think it’s too difficult to protest.”
While it can be a hassle and time-consuming, McCranie offers a few ideas to minimize your burden.
First, pay attention to the deadlines on your appraisal. If you think the assessment is too high, you have to file your challenge within a narrow window or you waive the right to complain. Then you have to get to work.
“Obviously, you want to get comps,” McCranie says, referring to comparable properties in the neighborhood. The problem with the CAD is, they treat most properties in an area as virtually identical, except for square footage. You need to find actually comparable properties.
“If you know there are defects in your house that make it less valuable a falling-down fence, bad carpet, sagging roof document that,” suggests McCranie. Anything that you can point to (preferably with photographs) that makes your house seem less desirable are, ironically, good for you. (Of course, if you demonstrate these defects to the appraisal district, you’ll need to fix them before you sell the house if you want to get more money out of it.)
“If you’ve recently purchased a property and paid below what the appraisal is, take down your closing documents to the Central Appraisal District,” McCranie says. “That’s proof of market value right there,” and “market value” is the magic term for assessing property for tax purposes.
If taxes are really biting into your bottom line, you might want to buckle down and pay for an independent appraisal. Despite the word, the CAD rarely does “appraisals” in the literal sense: visiting the property, taking measurements, looking at the condition of the inside. They may presume your curb-appealing cottage is a showplace when in fact it may only be average.
“A real appraisal may find your square footage is less than the district reports take that down there. Of course, if they find you have more square footage, you may want to “‘lose’ that report,” McCranie winks.
Be prepared to argue and do everything in your power to prove that your assessment should be lower. There are limits to how much a property may increase year-to-year, and certain homeowners are entitled to deductions and exemptions that the district isn’t aware of (or may be aware of but hasn’t incorporated into your taxes). Come armed with photographs, affidavits and details. Usually, an appraiser will chop some amount off the assessment if you put up a fight.
And if they don’t and the tax stays as is? At least property taxes are deductible from federal income taxes.
Sometimes, you just have to take what you can get.
Visit McCranie at BobMc Cranie.com
This article appeared in the Dallas Voice print edition, March 2, 2006.