921 N. Fitzhugh

It’s that time of year when most of us needed a bottle of Jack and a bullet to bite on just to open our property tax bills. Personally, my taxes are up nearly 52 percent in the past five years with this year alone squeaking in a nearly 13 percent rise. I’ve been increase-capped four years out of five.

One recent morning I saw a new listing pop in for a 616-square-foot home on Fitzhugh between Swiss and Gaston Avenues priced at $179,000. At $290 per square foot, I was curious, especially because as of this writing it’s under contract.

Turns out it’s a flip and bundled with 1001 North Fitzhugh, a 1,324-square-foot, three-bedroom, two-bathroom home adjoining and sharing a driveway with 921 Fitzhugh. Both properties were listed at $478,000 or $246 per square foot. (Investment properties, same owner)

Being the season, I decided to look at their taxes. What a story they told.

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Here’s the net-net of the proposed Republican plan to “lower” our taxes. Mortgage interest deductions would be capped at mortgages $500,000 or less (half the current $1 million) for primary residences. Mortgage interest deductions for second homes would simply vanish. You may be thinking this doesn’t sound bad and you may be mostly right.  While I suspect the $500,000-plus market is relatively smaller than the sub-$500,000 market, the rub may be with the second home deduction.  After all, how many soon-to-be retirees have a $400,000 primary residence and a $250,000 second home?

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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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Sold and For Sale Signs

As if the doom and gloom from the almost-over election isn’t bad enough, the city of Dallas has an economic crisis brewing that will most likely mean higher property taxes in the future. How would that affect our local real estate market? I was speaking to a prominent agent last week about the sticker shock our property taxes give most transplants even with the lack of a state income tax.

“These California buyers are starting to look at our property taxes and think twice about our so-called affordable living,” she said.

Last Thursday, Mayor Mike Rawlings was in Austin, sitting before the Texas Pension Review Board. He was pretty doom and gloom over unfunded liabilities in the Dallas Police and Fire Pension Fund that have also send our bond rating down, making it more expensive for us to borrow money. The fund was, he says, ripped off by a “Bernie Madoff scheme” in which fund members guaranteed themselves 8- to 10-percent returns on their investments, then took the money and ran. Of course, the police elected their board members and city councilmen from years past sat on the board.

Now the pension board wants the city to cough up $1.1 Billion (with a “B”) to replenish the police fund.

If we do that, Mayor Rawlings says the city would have no choice but to increase its current property tax rate by 130 percent to cover the difference. (more…)

lowes

The next time you walk into Lowe’s and they ask if they can help you, you might say, “Yeah, pay your fair share.”

Big-box retailers are trying a new-fangled strategy to lower their property taxes, and in some states, it is working.

It’s called the “dark-store” strategy, borrowing a commercial real estate term that means a vacated building that has “gone dark”. This strategy has been used successfully used by some stores to cut local property taxes in Michigan and other states.

Now, it is being tested in at least four Texas counties. That’s where Lowe’s home improvement stores are challenging tax bills. Their arguments are that the property should be valued as if the buildings sat empty.

But they are not: the stores in Bexar, Harris, Hunt, and Taylor counties, are wide open.

Confusing? It’s a way to bully the tax authorities with the store’s sheer size. Hey, they argue: this building is big (and cheap) and it would be really hard to fill if we left. So if you want us to stay and pay something, then lower our taxes.

We haven’t seen this in North Texas thus far, but you know how good news travels fast in the business world.

If these stores are granted huge tax deductions, guess who would be forced to cough up the difference?

Homeowners.

“I do think that this is something that needs to be watched,” says our Tax Doctor Rob Wheelock.

Property taxes are going to be a big topic in Texas 2017.

“Next year the Texas lawmakers, lead by State Senator Paul Bettencourt, will be taking up property tax reform in hopes of closing some of the current loop holes,” says Rob. “I can’t blame any property owner, residential or commercial,  for keeping a watchful eye on their values and protesting if they believe that the valuations is too high.”

Especially if giants like Lowe’s and Home Depot start ditching their fair share. (more…)

AC Gonzalez

When it comes to real estate, I am the nosiest. Especially on Dallas County property taxes.

Last week, we looked at Dallas County Tax Assessor John Ames. I noticed he had a dramatically lowered value on his DeSoto home. He had, of course, a perfectly good (really, a terrible) excuse for having that lower value: he and his wife had a house fire in 2015. Thank God, no one was injured. By the way, I’m told the same thing happened to the victims of the Rowlett day-after-Christmas tornado. Come Jan. 1, the condition of your property is what the your taxes are based on. But we continue to look at what our fearless leaders are doing with their taxes during this time when residents are seeing the biggest increase in property values in Dallas history: how are our leaders coping?

By hiring tax consultants! Today we check on Mayor Mike Rawlings, City Manager (soon to be former City Manager) A.C. Gonzalez, and one-time Dallas mayoral candidate Marcos Ronquillo.

First of all, remember whose fault it is that our values are going up: prosperity.

“Let’s put the blame on the fact that the Dallas/Fort Worth area is a great place to live and the rest of the world has figured that out and are moving here in droves,” says our Tax Doctor Rob Wheelock of Property Tax Managers. “Blame Toyota, State Farm, Liberty Mutual, and FedEx.”

Those guys are in Frisco, but whatever.

We work hard, says Rob, to make sure clients don’t pay more than their fair share when it comes to property taxes, but the fact is, values are up and our investment in our homes is likely doing better than any of our other investments.

Can’t blame anyone who would try to get their appraised values hammered down, as are Mayor Mike and A.C. It’s like not taking a tax deduction. But Rob says this is going to be a tough year.

“I’d be willing to bet not more than one will end up with any kind of reduction, and double down that none will. This is proving to be a difficult year in Dallas County with our continued growth,” says Rob. “Remember the Appraisal District by law has to value properties at market value and if they fall outside of plus or minus 5% they get in trouble with the State Controller’s office.  Good luck.”

Mayoral-Candidates-Homes-014.jpg Rawlings on Lennox Lane

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Unfair Tax Appraisal: How to Fight Against Them With Texas Tax Protest

Sponsored By Texas Tax Protest.

Texas Tax Protest is a property tax consulting company which reduces the property tax burden home owners and commercial property owners pay on their properties.

Created By BlankSlate

Flummoxed, poleaxed, flabbergasted, gobsmacked: There’s no end to the adjectives one can use to describe how property owners feel about the shocking 2016 appraisal notices recently sent out throughout the state. In short, almost everyone is going to be paying a lot more in taxes this year … unless they protest these tax appraisals.

The average market value increases on residential properties∗:

Bexar County — 8 percent
Collin County — 11 percent
Dallas County —12 percent
Denton County — 6 percent
Harris County — 10 percent
Tarrant County — 14 percent
Travis County — 7 percent

(∗ Estimated market value increases are based on 2016 notified values, however not all properties have been noticed, therefore these estimates are subject to change.) 

Those are some hefty increases. And what’s worse is that those amounts will compound into the future to make a nearly unsupportable tax burden for many. While it’s true that we are in the midst of a very hot real estate market, that doesn’t mean individual taxpayers should shoulder more than their fair share of the load.

In all likelihood, many homes have never been individually appraised. That’s because the appraisal district does not have the personnel or time to assess each home. To simplify things, the appraisal district uses a mass system that bases appraisals on trending property values in entire neighborhoods. After reviewing sales information and market trends, the appraisal district often decides to raise the value of every home in a neighborhood by anywhere from 1 percent to 10 percent and, in some cases, as much as 60 percent, as we’ve seen this year.

Here’s How You Can Fight Back

There are two ways to protest the appraised value. The first is by Market Value. Using this method, sales of homes in neighborhoods can be used to support reducing appraisals. A good starting point is to evaluate similar properties on a dollar-per-square-foot basis. And although this is a hot market, there are still foreclosures. Under Texas law, foreclosures can be considered in determining market value.

The Equal and Uniform method is where homeowners point out that their property is unequally appraised compared to other, similar properties in the neighborhood. If they are overtaxed relative to their peers, they have a good case.

Unfair Tax Appraisal: How to Fight Against Them With Texas Tax Protest

Patrick Melton of Texas Tax Protest

Bear in mind also that appraisers are disadvantaged in two distinct ways. First, they don’t know the actual condition of the properties they are assessing. Homeowners who have deferred maintenance or who have outdated kitchens or bathrooms may save. Second, some property sales are not made public, because Texas does not require full disclosers on all real property sales.

Now, taxpayers can devote their time to learning all of the various strategies to protest their tax appraisals. Or they can call in an expert like Texas Tax Protest.

Texas Tax Protest knows that each home is different, every situation has distinct characteristics depending not only on the property, but the surrounding market. They provide a custom analysis of each home, every neighborhood, and examine the comparable properties, and develop a strategy when meeting with the central appraisal district.

May 31 is the Deadline to Appeal
Don’t miss out. Despite these shocking increases, less than 4 percent of homeowners ever protest their tax appraisals. That means, they could be leaving money on the table. The deadline to file a protest is May 31, this is your last opportunity to fight your 2016 appraisal.

Contact us online or call us at 214-960-5590.

Courtesy of PhotoBucket

Courtesy of PhotoBucket

Get caught up and read part one of Jon Anderson’s Property Tax series here.

Tax Dodging 101

Every Realtor I have asked has completely agreed with this statement, “The more expensive a home, the less accurate DCAD’s valuations are.”  The translation here is that the wealthier you are, the more able you are to pay taxes but the less likely you are to be paying your share.

And why not cheat?  We read almost daily of some large corporation relocating to Ireland to dodge taxes in what’s called a “Double Irish With A Dutch Sandwich” or the likes of Google’s outrageous UK deal to settle a ten-year tax dispute for a measly £130 million based on profits of £7.2 billion. Why not the little guy too?

We have become a society where given a choice, too many will take a shortcut when offered.

There are three components that abet property tax shortcuts.

  1. Non-disclosure
  2. DCAD inefficiency
  3. Tax challenges

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