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While in the process of searching for a home in Harris County I have been frequently finding a large discrepancy between the asking price for a given home and its tax appraisal value.
In researching these forums I have frequently found postings that state, in effect, that you can't judge market value based on the tax appraisal.
At the same time, I see countless people lamenting that, when tax time comes, that the appraisal is essentially "too much" and/or greater than the value of the home.
What I take from this is that, when it comes to paying taxes, folks want to argue that their house isn't worth squat (to have a lower tax burden), but when it comes to selling the house, they are frequently asking as much as 40+% greater than the appraised value (to make a good profit). While no one likes to pay taxes, this seems a little dishonest...
Is this an accurate assessment?
Using HAR (and not an agent to date) I've found a few houses that I like, but find the asking price to be far and above the tax appraisal value. I don't like the idea of making an offer that is 30% less than the asking price, but it would seem fair if the homeowner went down to the county a few months ago and told the tax assessor that the home was only worth 60% of the asking price. Make sense?
It might make sense in theory, but it doesn't make any sense if you really want to buy a house in the real world. Why should the seller sell it to you for 25 or 30% below market because you want to make decisions based on bad information? Make no mistake, if you are going by HCAD values, you are going on bad information.
I've said it before, the HCAD value has more to do with how well people fight their taxes than it does with what the property will sell for.
No one is going to jump up to pay more in taxes, call it dishonest, call it whatever you want. My point is don't call the appraisals accurate. In this weird market they can be too high or too low.
If it makes you feel better though, after a property is sold then HCAD usually "catches" the sale and jacks the appraised value up to the sales price, (or down as is sometimes the case in this market).
Using HAR (and not an agent to date) I've found a few houses that I like, but find the asking price to be far and above the tax appraisal value. I don't like the idea of making an offer that is 30% less than the asking price, but it would seem fair if the homeowner went down to the county a few months ago and told the tax assessor that the home was only worth 60% of the asking price. Make sense?
In addition to what Modster said...alot of taxes are held down by exemptions. Example: I purchased my home from an estate. It had been owned by an elderly widow whose taxes had been frozen years ago. The HCAD value was significantly artificially lower because the tax value had been frozen for 10-15 years. Like Modster said, HCAD caught up quickly when I purchased the house. There are exemptions for elderly, handicapped, veterans, etc. which may significantly effect the appraised value or the taxes if HCAD keeps up w/ the appraissals. This is especially true for lower value properties. Modster was also correct on the effect of fighting taxes. My SIL has fought their taxes on a consistent basis and kept her appraissal up to 100K less than her neighbors for years. Afraid she'll be out of luck this year due to a mild exterior remodel, will be hard to fight that one.
While in the process of searching for a home in Harris County I have been frequently finding a large discrepancy between the asking price for a given home and its tax appraisal value.
In researching these forums I have frequently found postings that state, in effect, that you can't judge market value based on the tax appraisal.
At the same time, I see countless people lamenting that, when tax time comes, that the appraisal is essentially "too much" and/or greater than the value of the home.
What I take from this is that, when it comes to paying taxes, folks want to argue that their house isn't worth squat (to have a lower tax burden), but when it comes to selling the house, they are frequently asking as much as 40+% greater than the appraised value (to make a good profit). While no one likes to pay taxes, this seems a little dishonest...
Is this an accurate assessment?
Using HAR (and not an agent to date) I've found a few houses that I like, but find the asking price to be far and above the tax appraisal value. I don't like the idea of making an offer that is 30% less than the asking price, but it would seem fair if the homeowner went down to the county a few months ago and told the tax assessor that the home was only worth 60% of the asking price. Make sense?
Agree with what the other two said---there are all kinds of exemptions, and the taxes freeze when you get to be 65, I believe, for the remainder of the time you own the property. There's a lady down the street from me who's 90-ish, and her taxes stand out when you look at our block---hers are at something like 1976 levels (when these houses were new).
You really aren't considering human nature, are you? I mean, I'll tell you what: I don't know what kind of car you're driving right this minute, but I'll give you $100 cold hard cash for it right now. Bona Fide offer. Cash on the barrel, what do you say? I mean, it's worth $100 to me! It may be worth more to YOU, but that's YOUR problem.
The only way to make your scenario work is this: You have to be completely emotionally detached from the homebuying process, and look at it solely as an investor.
I sold real estate at one point early in my career, in Dallas. We had this investor who would come in periodically (he had a Realtor on retainer) with about 30 contracts---contracts on every one of our listings with an assumable loan. His offer? The amount they owed, regardless of the value of the property. Most angrily rejected his offers, but on every one of those "sweeps", he'd pick up at least one house for perhaps half what it was worth. He hadn't even seen the house itself, and didn't care what it looked like---he was looking for rental property. Sometimes he'd catch a couple in the throes of a divorce, sometimes grandma had died and the kids were in California or somewhere and just wanted the thing sold, sometimes someone had lost a job and had to get out from under it. Whatever, he managed to get a house that way, but he made a LOT of offers, and he was totally not picky about location, condition, schools, layout, etc. He'd then sweep in and recarpet, paint, then offer the house for rent at sky-high rates. I'm sure he made good money doing that.
Bottom line: you might find a place doing as you suggest. If you try to get MY house that way, you will get "rejected, no counter". You'll get a LOT of those. You'll get a property, but you may or may not be happy with the layout, location, etc.
It's all about whether you're buying shelter or buying an investment.
Foreclosures are also bringing the appraisal values of some homes down. My home's tax appraisal went down 15% this year. The appraisal office said it was because we had 3 foreclosures nearby. There are no more foreclosures around us and I would never sell my home for the tax appraisal. I also live in an older neighborhood (homes over 30 years old) where the desirability of the houses varies wildly based on whether or not the house has been maintained or remodeled. If one house is fully redone, new windows, new roof, new kitchen, etc etc sitting next to a house that is almost completely original these homes should not sell for the same price per square foot. HCAD appraisal doesn't take anything other than recent sales into consideration.
It would seem then, that assuming
1) the current homeowner isn't a disabled veteran
2) elederly
3) otherwise eligible for some tax break
and the appraisal value/taxes are being paid at 70% of the asking price (i.e. what the homeowner thinks the home is worth) that the current homeowner has been shirking taxes (whether he didn't inform the county that his house was under-appraised or he actively fought to knock down the appraised value). Just trying to get this straight...
It's not shirking taxes... HCAD just hasn't caught up with true market value in some of older areas in Houston. It wasn't untill about 5 years ago that the real estate site HAR.COM gave them sales prices (thanks har...not). Houses that are taxed at 70% are USUALLY OLDER, more establish neighborhood homes that don't have a high turnover ratio in the area. Or a house that hasn't been sold in 15 years.
How is it shirking? Who in their right mind would contact HCAD and say... "errr...you know you are taxing me at only 70% of what I could sell the house for. I feel really bad about, so could you up it to full market value please? I really can't use that extra grand to keep this old lady up or anything."
Believe me, when you pull a permit to fix (aka REPAIR) the slightest thing, they will slam you for full market ,and start hiking it 10% a year after that.
And while the house may be taxed at 70% now, the minute it's purchased these days it goes RIGHT UP TO FULL MARKET.
Last edited by EasilyAmused; 10-16-2009 at 07:57 AM..
Foreclosures are also bringing the appraisal values of some homes down. My home's tax appraisal went down 15% this year. The appraisal office said it was because we had 3 foreclosures nearby. There are no more foreclosures around us and I would never sell my home for the tax appraisal. I also live in an older neighborhood (homes over 30 years old) where the desirability of the houses varies wildly based on whether or not the house has been maintained or remodeled. If one house is fully redone, new windows, new roof, new kitchen, etc etc sitting next to a house that is almost completely original these homes should not sell for the same price per square foot. HCAD appraisal doesn't take anything other than recent sales into consideration.
That sounds similar to where I am.
Quote:
Originally Posted by NewTexan1
It would seem then, that assuming
1) the current homeowner isn't a disabled veteran
2) elederly
3) otherwise eligible for some tax break
and the appraisal value/taxes are being paid at 70% of the asking price (i.e. what the homeowner thinks the home is worth) that the current homeowner has been shirking taxes (whether he didn't inform the county that his house was under-appraised or he actively fought to knock down the appraised value). Just trying to get this straight...
Basically, yes, though I wouldn't use the word shirking. Example: We bought our house in 2007, and it had a low tax value because the prior owner had owned the house since the 80's. So the county missed out on being able to assess on increase in values in my area during the late 90's (this is inside the loop), and was stuck at 10% per year. We expected that they would ding us the year we purchased the home, since they can assess at market at that point, but they didn't, raising 26%, but still about 20% below market (i.e., what we paid just months before). Then this year, they actually lowered our value by about 13%, which we assume is due to the relatively low quality of homes that sold (original, not remodeled, so a low price per sq ft). Now, are we going to call up the county and tell them they are now 50% under market (we had a formal appraisal earlier this year)? Heck no, and we know that next year when we pull a permit for our kitchen remodel, the county will figure it all out. Sadly, the money "saved" on our property taxes is going to pay for the increase in our homeowner's insurance, so we don't really even get a benefit (and I would rather pay the county and school district than Nationwide!).
HCAD is a joke. I don't think we are cheating. It's just business. HCAD knows whats up anyway.
Yeah, when they appraise a property, where the house has been torn down and MCMANSION rebuilt, the same price as a 1960's remodel...and they tell you, you don't have an argument because it's Price per SF in the neighborhood...they can just leap off a cliff for all I care.
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