The Dallas Central Appraisal District and I have very different opinions on what is considered “desirable,” it seems.

Last year I began to notice a change in how DCAD valued certain multi-family and high-rise condo properties. Specifically, I noticed that The Warrington units of the same floor plan and judged as being in the same condition were almost always valued the same. On the surface, this seems logical, but is it?

First, a little background.

DCAD categorizes homes by what they call “desirability” but might as well be called “condition.” Unfortunately “desire” seems more in line with location than a structure’s physical repair. There are eight buckets of desirability ranging from undesirable to excellent. During this year’s annual property tax challenge, I was told that single-family homes utilize all eight while condos use fewer. For example, for my Athena floor plan, there are only four categories used – Average, Good, Very Good, and Excellent.

Think of desirability as a multiplier in the assessed valuation equation. If “average” equals one, then those properties rated lower get a base value multiplied by something less than one. The opposite math for those rated above “average” being multiplied by something more than one.

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How could it be that in Dallas neighborhoods booming with redevelopment, that multifamily properties and investment properties haven’t seen any increases in their appraisals?

Last week, I wrote an update on the DCAD valuations for properties that are part of a block on Lemmon Avenue that was to have been the site of a Central Market (before HEB shifted plans to McKinney Avenue). That story showed DCAD substantially raising the assessed valuations in 2019.

But as you know, I’ve written a few stories on DCAD, and particularly one on properties at the end of a block of Fitzhugh Avenue bounded by Swiss and Gaston Avenues.  I’d seen a new listing for a 616-square-foot detached house at 921 N. Fitzhugh and was curious. The price seemed high, but it was a good-ish location, so I checked the taxes. That check expanded to encompass 13 properties at the end of the block. What I found was astonishing. Two apartment buildings hadn’t seen a penny increase in their appraised value in five years. Another investment property whose value had bounced around between $75,500 and $78,560 since 2011.

What happened in 2019 is equally astonishing …

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When we “feel like just a number,” we’re really just reflecting our uniqueness being ignored. We’ve long known we’re just a number to taxing bodies like DCAD … albeit one with a dollar sign in front. But recently, I’ve found we’re a percentage, too.

In valuing property, DCAD calculates the total market value based on both land and “improvements” (structures). The combination of these numbers equals the total assessed value of a given property. All fine so far. A (land) + B (structures) = C (total market value)

But did you know that there’s a ratio used between land and improvement values? You likely think this means that land appreciates at roughly the same rate of structures. Partly. It also means that land should be equal to a certain percentage of the structure. And when the ratio gets out of whack, it’s adjusted. On the surface this too seems generally fine, provided you start with structure and land that fall within the ratio (and nothing changes).

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Why Property Taxes are so BAD

Last weekend, the National Association of Real Estate Editors (NAREE) awarded this series discussing state and local property taxes “Bronze” in their Best Series category.  While originally published in May 2016, a year later nothing has alleviated our property tax increases. 

Several weeks ago I wrote a pair of columns (here and here) about how the core math of Texas property taxes is fundamentally broken (and always has been).  While, A+B=C, if “A” is patently wrong, how can “B” and “C” be accurate?

In this case, “A” is assessed property value, “B” is property tax rate and “C” is the revenue required to run the city and state.  In Texas, without real estate transaction disclosure, “A” is always a bit of a crapshoot as DCAD pulls assessed values out of thin air.  Now I’m sure there’s some enormous algorithm they use to calculate values (a bottle of Jack, a blindfold and a dart board?) but in the end, not having access to the actual selling prices of real estate in Texas hamstrings a meaningful conversation about taxation rates.

As it is, property tax assessment districts in Texas have higher rates (“B”) than are actually needed because they have no visibility into “A” valuations.  Texas rates are high because the underlying assessed values are inaccurate.

Yesterday, the Dallas Morning News outlined how this year’s rate increases hit middle-income homes harder than higher income homes.  Color me shocked!  And yet, the middle class are just as vocal about keeping Texas’ system of non-disclosure in place.

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Why Property Taxes are so BAD

Why Property Taxes are so BAD

Several weeks ago I wrote a pair of columns (here and here) about how the core math of Texas property taxes is fundamentally broken (and always has been).  While, A+B=C, if “A” is patently wrong, how can “B” and “C” be accurate?

In this case, “A” is assessed property value, “B” is property tax rate and “C” is the revenue required to run the city and state.  In Texas, without real estate transaction disclosure, “A” is always a bit of a crapshoot as DCAD pulls assessed values out of thin air.  Now I’m sure there’s some enormous algorithm they use to calculate values (a bottle of Jack, a blindfold and a dart board?) but in the end, not having access to the actual selling prices of real estate in Texas hamstrings a meaningful conversation about taxation rates.

As it is, property tax assessment districts in Texas have higher rates (“B”) than are actually needed because they have no visibility into “A” valuations.  Texas rates are high because the underlying assessed values are inaccurate.

Yesterday, the Dallas Morning News outlined how this year’s rate increases hit middle-income homes harder than higher income homes.  Color me shocked!  And yet, the middle class are just as vocal about keeping Texas’ system of non-disclosure in place.

For me, this is the most salient paragraph …

“Local officials say they are hamstrung by state law in trying to accurately assess commercial and high-end residential properties. Texas, unlike most other states, doesn’t require real estate sales prices to be publicly disclosed. Property owners who can afford pricey Realtors often demand nondisclosure agreements. State law also permits property owners who successfully challenge their appraisals to collect attorneys’ fees from the county.”

If non-disclosure died, here’s what would happen…

First, the state would take 3 to 5 years to change the system.  During that time, the state taxation districts would rebuild their databases of assessed values based on transactions occurring during that window.  From there, the state would reverse engineer the taxation rate.  If the state needs $X and property is worth $X, what rate gets us to that level?  Hint … it’s a rate a HELL of lot lower than it is today.

For example …

A $200,000 home taxed at today’s homestead rate of ~2.3 percent equated to $4,600 per year in property taxes.  But let’s say that home is really worth $310,000 … then the tax rate would only need to be 1.5 percent to reach the same $4,600 in annual property taxes.

I hear you saying … “If, after this exercise homeowners still pay about the same, what’s the point?”

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Photo from votemcgough.com

Photo from votemcgough.com

Did Dallas City Council candidate Adam McGough buy a condo in Highland Park just for the chance to send his kids to Highland Park ISD?

McGough, a former chief of staff for Dallas Mayor Mike Rawlings and current candidate for District 10 city council seat, says yes, but it’s not like that. Highland Park ISD officials, however, have announced they’re looking in to the whys and wheretofors of the whole situation, and just about every media outlet in Dallas is drilling down on the housing situation of the McGough family. (more…)

DCAD-logo2What a difference a year makes! I got my notices from both Dallas County and Bexar County, and I immediately called up Rob Wheelock to scream, HELP!

Help me help me, I’m poor — or I will be come January 31, 2015.

Yikes, Dallas real estate values are up, so the Appraisal District is following through and raising values. After next January, we might even be able to afford pay raises for our City Council members.

(What do you think about that, by the way?)

Here’s a guest post on the whole depressing appraisal issue by Rob Wheelock, owner of Property Tax Managers ,and a veteran when it comes to whittling down your property tax bill…

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