Texas Property Tax Expert Please help (Howe: sales, 2015, buying a home)

[Hzsscar]

Here is the story, We are buying a home from a custom builder in Jan 2015 inside the loop. The original contract stated completion date was Dec 2015. But we are assured by the builder that the home would be completed way before that around Oct 2015 as a matter of fact.

Now there was some delay caused by weather in March, April where we had that huge flood. The foundation pouring was delayed according to him and he said it messed up his schedule with the contractors,so there is a good month or two with no work being done by him. Now, the current statues is the insulation is about to going, Sheetrock is not even on yet. I don't think we are going to be able to finish on time in December this year. So I asked the builder what would be the new ETA. He told me it would be at least in Jan 2016.

Now the question is property tax, as far as I knew if you are not officially in your home by Jan 1st. You can't claim homestead Exemption, which is kind of a big deal 20% of home value. He told me that if the home isn't finished and HCAD will treat it as incomplete and my tax for 2016 will actually be a lot lower because of that. Is he bull****ing here? And how will HCAD determine your property value now, from the unfinished home or they will send someone to check it out once we all moved in ?

We are very new to this. Any help would be greatly appreciated.. Thanks in Advanced.

[houstonfan]

I'm not a tax expert but as I understand it, they assess the value on their schedule. Whatever has been done at that time is what is assessed. So I think your builder is correct, an incomplete house will be valued less than when it is built.

[marksmu]

Just did this...Hcad will appraise it for the value as if jan 1, in its current state. If it's a $1,000,000 home and its 55% complete, expect to pay taxes on $550,000....they usually appraise low on % complete, but if they do not, you can use your draws to prove the actual cost as if Jan 1.

Be aware though they will appraise your house for about $750,000 more than it cost when you are done building....that way when you protest you give them your actual cost you feel like you won and they get the actual value of your home...

[Lowexpectations]

Curious who the builder is if you don't mind sayng

[Lowexpectations]

Originally Posted by marksmu

Just did this...Hcad will appraise it for the value as if jan 1, in its current state. If it's a $1,000,000 home and its 55% complete, expect to pay taxes on $550,000....they usually appraise low on % complete, but if they do not, you can use your draws to prove the actual cost as if Jan 1.

Be aware though they will appraise your house for about $750,000 more than it cost when you are done building....that way when you protest you give them your actual cost you feel like you won and they get the actual value of your home...

My new contruction wasn't completed until August and the appraisal wasn't just finalized very close to final sales price, no where near the completion level as of 1/1/15

[predatorprey]

Is get some kind of doc from the builder stating the percentage of completion on Jan 1st. Use it as evidence when you protest your taxes.

[marksmu]

Originally Posted by Lowexpectations

My new contruction wasn't completed until August and the appraisal wasn't just finalized very close to final sales price, no where near the completion level as of 1/1/15

I completed my house April 29, 2013....We were in drywall stage on Jan 1...I believe they were texturing on the day HCAD inspected...they took pictures from the inside and guessed at a value...it was close....actually a little low based upon my actual costs....I would say on Jan 1, 2013 I was 55% complete, but they appraised it at about 40% completion cost. So my 2013 taxes were much lower.

On Jan 1, 2014 (the house was obviously complete in April 2013) HCAD appraised the property for more than 2x what it actually cost to build the house....(remember you can not homestead a property until you have lived in on Jan 1 of any year) It was outrageous. I took my executed contract, along with my draws and wire transfer forms to my protest and the cost was reduced instantly to exactly what I paid to build it.

Its a new game they are playing....appraise new construction like its a solid gold brick, and the owners bring their real values to them on the very first year. Its blatantly dishonest, but works very well.

The biggest disadvantage to new construction being complete early in the calendar year is that the appraised value is not set until the following January...so if you are in a rapidly inflating market, your appraisal price is not capped yet and they will try to raise your appraisal.

However, most homes costing more than $500,000 right now are actually in a declining market, so completing early in the year may be advantageous as you would get the benefit of a lower first year, and if prices continue to fall all year, you can use the declining comps to lower your total value.

[baggiegenes]

The house will be appraised based on the percentage complete. However, they are appraised by drive by from the outside. So if the house is mostly complete except for some interior finishing, it will most likely be appraised at full market value. Also keep in mind that market value and what you paid are often not the same thing.

Also be aware that the single largest portion of your taxes is usually the school district. Most school districts don't give a full 20% reduction. Instead they may give like a flat 15,000 off appraised value of the house. That could mean the exemption would save you much less than 20% overall on your taxes.

[Lowexpectations]

Originally Posted by baggiegenes

The house will be appraised based on the percentage complete. However, they are appraised by drive by from the outside. So if the house is mostly complete except for some interior finishing, it will most likely be appraised at full market value. Also keep in mind that market value and what you paid are often not the same thing.

Also be aware that the single largest portion of your taxes is usually the school district. Most school districts don't give a full 20% reduction. Instead they may give like a flat 15,000 off appraised value of the house. That could mean the exemption would save you much less than 20% overall on your taxes.

Hisd gives the full 20% reduction for homestead

[Hzsscar]

Originally Posted by marksmu

I completed my house April 29, 2013....We were in drywall stage on Jan 1...I believe they were texturing on the day HCAD inspected...they took pictures from the inside and guessed at a value...it was close....actually a little low based upon my actual costs....I would say on Jan 1, 2013 I was 55% complete, but they appraised it at about 40% completion cost. So my 2013 taxes were much lower.

On Jan 1, 2014 (the house was obviously complete in April 2013) HCAD appraised the property for more than 2x what it actually cost to build the house....(remember you can not homestead a property until you have lived in on Jan 1 of any year) It was outrageous. I took my executed contract, along with my draws and wire transfer forms to my protest and the cost was reduced instantly to exactly what I paid to build it.

Its a new game they are playing....appraise new construction like its a solid gold brick, and the owners bring their real values to them on the very first year. Its blatantly dishonest, but works very well.

The biggest disadvantage to new construction being complete early in the calendar year is that the appraised value is not set until the following January...so if you are in a rapidly inflating market, your appraisal price is not capped yet and they will try to raise your appraisal.

However, most homes costing more than $500,000 right now are actually in a declining market, so completing early in the year may be advantageous as you would get the benefit of a lower first year, and if prices continue to fall all year, you can use the declining comps to lower your total value.

Now, after reading your post we will have to fight the property value in 2017 for sure now.