Property Appraisals   7/10/08
David Tuthill

As the 2008 residential appraisal period closes, I feel compelled to share with you my experiences dealing with the Dallas County Appraisal district.  Dallas Blog posts Dallas Republican Tom Pauken?s experience.  We both agree the appraisal process needs to be significantly reviewed and fixed.

Over the past legislative session, it was suggested that the appraisal district's valuations on residential property value increases be capped at 5% per year.  In a non-binding referendum in the Republican primary race, the concept passed overwhelmingly.  Despite the public's desire to prevent appraisal creep, retiring Republican Fred Hill (the darling of municipal government free spenders) is fighting to remove the 10% cap we presently have.  Then, the appraisal districts are unhindered from realizing any percentage increase per year be it 10% or even 49% (the value increase I have observed for my property and my father?s in the past evaluation period).

These sky rocketing values have occurred due to real estate speculators/developers in a neighborhood as well as the creative mortgages of the financial community.  Fred Hill was instrumental in fighting the mandatory discloser of sales values on commercial properties as they go un-reported for taxable values.  One can observe this anomaly in the revaluation of the property that the Dallas City Council is eyeing for that new must have hotel.  It was originally valued at $7 million on DCAD records and has been adjusted to more closely reflect the purchase price of $43 million the City of Dallas has offered.  Commercial values have historically been a weak point in the overall appraisals city wide, forcing the burden onto the residential home owners.

MY TAKE:

After a year of the Dallas Morning News telling us the Dallas real estate market is not affected by the downturn in the housing market.  In the neighborhood where I live, several large McMansions have been on the market for some time.  Some have reduced their price in an effort to unsuccessfully sell them.  A few have been on the market for over a year.

One neighbor purchased a home (non-McMansion) during the upswing of the market and  now has to sell his home before foreclosure.   Since his house is now vacant, I wonder if he succeeded or fell like so many others who got questionable loans for houses they could not afford.  Developers still develop even though many of their offerings sit idle on the market.

Last Friday, Dallas Morning News had a piece on upscale homes joining the foreclosure lists Foreclosures of Dallas-Fort Worth homes worth more than $1M double  adding to record foreclosures in North Texas.

With all of the mess in the housing market, does the Dallas County Appraisal District acknowledge the fall in home prices?  NO, of course not.  If anything, the district is more adamant that the value of your home has increased.  The attitude down at their offices is that they will do everything in their power to justify their assessment.

In my experience this year dealing with the district, I called them early in their schedule to get (as I've done in many past years) the ?comparables? they used to justify the value of my house.  The young man on the phone refused to give them to me.  When I reminded him he was required by law to give me the information, he suggested that I drive to their offices (make as many trips as possible with gas over $4 per gallon) to get the information in person, instead of getting the few comparables over the phone.  ?What do you expect us to do?  Help you with your defense??, he asked.  Well, yes.  In our democracy, we are entitled to such information, be it in protesting our appraisal or defending ourselves in a court of law.  That is what an employee of the Appraisal District is there for, to provide information to the taxpayers who pay his salary!

In a subsequent call to an appraiser to review comparables that a third party tax agent had sent me as a sales enticement, I got a gentleman who acknowledged the lower values of these houses, but tended to focus more on the higher values only.  He touted a new feature on their web page that once you got your acknowledgement of your protest and subsequent hearing date that there was a code that you could enter on the entry for your house to get additional appraisal information.  He suggested I spend $2 to get ?all of the information? the appraisal district used to come up with my values.  Unfortunately, the information on foreclosed properties would not be available as that might skew their interpretations.

Of course, this would involve two trips to the appraisal district.  One to order the packet; then another trip to go pick it up.  This would be in addition to the trip after reviewing the information to talk about it informally with an appraiser before the hearings and yet another trip to actually attend the hearing if the one on one meeting did not yield a lower value for my house.  I was able to order it by e-mail after a lengthy discussion and reiteration of my woes with another DCAD person who was in charge.  Dealing with the district over the phone after lengthy waits was like pulling teeth.

The appraisal district wanted me to spend as much time as possible either in multiple trips to their offices or at their offices doing research.  A majority of taxpayers would not be able to afford the gas nor time from work to devote to their valuation appeal.  The times I was down there, it was an exhausting effort to find a parking place.  Then, the lobby was an ocean of people waiting to get access to the floor where they could wait some more in their quest for a one on one session with an auditor.  It was a crowed mad house of residential homeowners vying to get to an auditor in the limited time that they had. A real zoo!

The information from the web page was an excel spreadsheet raw data dump of all the houses in my neighborhood in no particular order.  The package cost $2 and a trip to the appraisal district offices.  It contained house values that closely matched the assessed value of my house or of greater value.  Not surprising, nor expected, was the absence on the lower valued houses the tax agent sent me in their solicitation offer of their services.

In the past when I have pleaded my case to the county appraisers, I provided the district with an excel spreadsheet I compiled.  Each similar house has it?s history valuation back to 2000 broken down by house value, land value and combined values yielding price per square foot and other meaningful measures such as condition, pools, sprinklers and other pertinent items.  It covers 10 pages and must be taped together with its colored columns to aid in divining my value.  While there is a wealth of data in it, the only trend I see is it shows those poor souls who have never protested their property values as their values rocket up in value.  

Perhaps they think they will be left alone next year.  No, they will not.  The price per square foot when comparing houses is not in a tight value you would expect for a neighborhood.  Instead, the values per square foot are all over the place.  It is not surprising because in my past experiences when you lower the value of your house for needed repairs the appraisal district will fiddle with the assessment by upping your land value.

In my father's case, the lot next door was valued at a lower value.  Since it was "in a different neighborhood" (the houses were built in the 70's), the land must be different and as a result so should the land value.

In short, the appraisal district hindered every step I took to get information.  Once presented, they employed smoke and mirrors to justify their valuations.  I have heard from others who attempted to appeal their values and had the appraisal district not take them seriously.  They were dismissed until they had hired a tax agent to plead their case.  Next year, it may be worth the funds to hire a tax agent to spare me the grief, time and gas and to ensure meaningful results.

OTHER STATES:

Indiana residential valuations are now capped a 1% per year, rental properties at 2% per year and commercial properties at 3%.

In California, the tax you pay when you purchase your home is the tax you pay each year you reside in your home.  Only when the house is sold are the property taxes reevaluated. This really puts a break on the speculators.

WHAT WE NEED:

First, the Legislature needs to enact the 5% cap for residential property value increases per year, even better a 3% cap.

The Legislature needs to make mandatory disclosure of sales prices of commercial properties, as they can be accurately reflected.

We need to get away from local governments appointing appraisal board members as they become beholden to those who appoint them.

A friend in the real estate industry suggests a transfer fee or title fee, to be paid by either seller or buyer, could be a revenue source.  This one time fee would be a percentage of the sales price of the property to be paid, when the house is sold, by either party as per the sales agreement.  This would have a cooling effect on those who speculate in housing and cause the tax increases by their activities.

In closing, I urge all residential homeowners to call your elected state officials to express your views on the appraisal process and request a 5% cap (3% is better).  I would remind those who rent they indirectly also pay property taxes in the rent paid to the landlord.  I doubt your landlord absorbs an increase of property taxes in a rental property but passes them on to you in the form or higher rent.

David W. Tuthill