How to protest your property assessment

If you’re like many Texas real estate investors out there, you’ve been watching the sales prices of property increase month after month. While a more vibrant market means that the value of property is rising, it also means that your tax appraisals might be increasing also. If you are worried that your commercial property’s tax assessment may exceed its market value, then you should take action and appeal your assessment.

What you might not know is that over 60% of taxable property in the United States is over-assessed according to the National Tax Payers Union. That means that, in spite of tax bills going up everywhere, most taxpayers either aren’t doing anything about it or are not succeeding in their appeals.

Generally, property owners don’t appeal their property taxes because they don’t know the procedure and fear the process. Little do they know that with capable professional representation, the odds of achieving a property tax reduction are quite high.

Know your local codes and formulas

By in large, property taxes are determined by the value of your property  – not something arbitrarily set by state and municipal governments. Communities use a variety of formulas to determine what your property taxes will be, but all of them have one thing in common: they depend on your property’s assessed value. Some use the actual Market Value, while others depend on a percentage of the property’s overall value.

Whatever formula they use to determine the value, they then multiply it by the local tax rate in order to compute your overall tax liability.

Know the process

Even with representation, you should always establish a timeline. You need to know when assessments are sent and what the deadline for appealing them is. Your local assessor’s office should have all of this information.

Whether it’s here in Texas or elsewhere, deadlines and the appeals process can vary from locality to locality. So does the amount of time that you’ll be permitted to make an appeal. In some jurisdictions, you’ll only have a few weeks to file your appeal. In others, you have months of time to file. Just be sure to know.

Building a case

Regardless of what you might think, making your case isn’t as simple as being upset that your taxes are too high. Complaining about how taxes are spent; that won’t help either! What you’ll need are cold, hard facts about your property and its valuation.

Your assessment can be appealed on the basis of two things: A mistake made in the assessment or an assessment that’s considerably higher than the values of other comparable properties.

Correcting mistakes

During a commercial property appraisal, the appraiser might be using incorrect historical information, older documents or may simply have a completely different view of your property than you do. Needless to say – there’s a lot of room for error!  So, you need to begin by reviewing the assessor’s records carefully.

One common mistake comes from the process of the appraisal itself. Without specific information on each property, tax appraisers must rely on Mass Appraisal techniques; applying market rents, occupancies and other information to similar properties in a submarket to derive values. Often times, these rents and occupancies are higher than what the property actually collects, thereby, resulting in over-assessed property values.

Another common mistake is the application of values on a per square foot basis.  In essence, the tax appraiser determines that similar properties in a submarket should be valued at a certain amount per square foot and allocates them to properties on the basis of their total square feet.  One problem with this method of appraisal is that the square feet of a property that is used may be the gross square feet which includes non-leasable areas like common areas and management offices.

Another problem with this technique is that properties built in the same year in similar locations with similar size may differ in physical characteristics and, therefore, may command different rents.  The person protesting the value needs to know the differences in the subject property versus similar competing properties.

Hiring a reliable, experienced tax consultant can help you identify flaws in your commercial property’s valuation and prevent you from having to bear the burden of being over-taxed.

Pay attention to your neighbors

One way you can challenge an assessment is to compare how your property stacks up to others in your submarket. We’d recommend comparing at least five to ten comparable properties.  Again, you need to know the differences between your property and the ones you are comparing it with.

If the data looks solidly in your favor, then the next step is to meet with the tax appraiser in an attempt to reach an agreement on the value of your property.  A high number of cases can be settled informally without hearings. What you do need to know, though, is that these are negotiations and yes, you’re best off hiring a professional to do them. However, with sufficient, convincing data supporting you, you’ll almost always end up with a lower valuation.

When to head to a hearing

If an assessor won’t meet with you informally or the two of you can’t come to an agreement, then you must file a formal protest. In some places, the assessor isn’t allowed to meet with you at all, so a formal hearing is the only way to seek a reduction.

At a formal hearing, each side is given a certain amount of time to present their evidence to a panel of citizens and present counter arguments to what the other side has presented.  Make sure you have all of your evidence well-organized, from comparable property photos and data to documents that can make your argument easy to understand.  

It can be a good idea to sit in on someone else’s hearing. That way you’re familiar with the process and the kinds of questions that are going to be asked. You’ll also get a sense of what kinds of arguments hold weight and which ones might not.

If you choose to work through the appeal process on your own, you need to remember that two people can present the same information and end up with different results.  This is usually based on the fact that one of them is able to present the evidence in a more professional, respectful, organized and understandable fashion.   

Professional representation maximizes your chances of success

Getting expert assistance to save time and reinforce your appeal is almost always worth the price. Not only are Property Tax Advocates experts in their respective jurisdictions, but they’ll also be in tune with the local market and the arguments you can leverage the most to ensure you get the best return. When laid up against the backdrop of the money you’ll save in property taxes over the long term, the cost is worth it. 

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