Using Assessment Comparables to Fight Unequal Property Taxes
The Texas Legislature gave property owners an incredible gift in 2003. While all property owners agree that property taxes are too high, owners become particularly incensed when property taxes are assessed inequitably. Owners don't mind paying their fair share, but it is unacceptable to pay more than other owners pay for similar properties. For example, Bob owns an apartment complex which he recently purchased for $20,000 per unit. It is assessed at $20,000 per unit. However, most of the neighboring properties are assessed for $15,000 per unit. Bob agrees that his assessment is consistent with the market value based on the recent arms' length sale; however, he deeply resents being taxed more than his competitors.
How Equity Appeals Reduce Property Taxes
The following example indicates the potential that exists when appealing with assessment comparables; using assessment comparables is sometimes also called uniform and equal (U& E) or an equity appeal. Gary owns an apartment complex, which in 2002 was assessed for $3 million. The 2003 assessment was increased to $5 million. The net operating income for the property supports a value in excess of $5 million; however, the assessments for similar properties support a value of approximately $3 million, based on a per unit basis. Gary's tax consultant compiled information on the assessment comparables that supported a value of $3 million and presented this information to the Appraisal Review Board (ARB). The ARB panel members asked why the tax consultant did not present information on the income and expense for the property. The tax consultant replied that the market value was not at issue in this appeal; the issue was uniform and equal. After considering the assessment comparables, the panel concluded to a value of $4 million, which generated tax savings of approximately
$30,000 for Gary in 2003.
What is Uniform and Equal?
Appealing under equity or uniform and equal essentially involves using a reasonable number of appropriately adjusted comparable properties. The subject property should be assessed for the median level of the comparables after adjustment. The technical aspects of this will be discussed later in this article. However, the essence of an equity appeal is to contrast your assessed value with the assessed value for similar properties.
Benefits of an Equity Appeal
Using assessment comparables to reduce your property taxes can be an effective and cost efficient tool. It increases the number of appeal options by at least double and perhaps six-fold. Equity provides meaningful help when the assessed value is less than or equal to the market value of the property. When meaningful evidence is presented on inequitable assessment, fairness does not need much explanation. For example, if your tract of land is assessed at $4 per square foot and an adjoining parcel with similar functional utility is assessed for $2 per square foot, a tax assessor or appraisal review board member can readily understand an adjustment is warranted. In addition the appraisal district has the burden of proof at an administrative hearing. Whether it is on market value or on equity, you do not have to be an appraiser to prepare or understand an equity analysis. Most owners have historically utilized only an appeal on market value at the informal level of appeal. This essentially gives them only one of six appeal opportunities. Using uniform and equal and using the three appeal levels (informal hearing, appraisal review board hearing and judicial appeal) gives the owner six options to appeal property taxes annually. One setback to appealing on equity is that it can be time consuming to gather and summarize information on assessment comparables. The six appeal options are summarized below: