How to Get Fair Market Value in an Unfair Market

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How to Get Fair Market Value in an Unfair Market

  1. 1. Getting Fair Market Value in an Unfair Market<br />Deborah L. Crain, J.D.<br />10707 Corporate Drive, Suite 126<br />Stafford, Texas 77477<br />281-565-5777<br />deborah@deborahcrainlaw.com<br />
  2. 2. Taxation must be Equal and Uniform<br />Property must be taxed on the Basis of its Fair Market Value<br />Appraisers may not Appraise Property above its market Value<br />Previously there was a single Appraisal Review Board for each Appraisal District – <br />Texas Constitution amended to allow for smaller counties to combine their efforts <br />Texas Constitutional Principals of Property Taxation<br />Law Office of Deborah L. Crain, P.C ., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  3. 3. Three Departments in the Assessment and Collection of Property taxes:<br />Taxing Unit (Fire Department, School District, City government, MUD, other Special Entity)<br />Appraisal District-Independent agency that assesses property in the County<br />Collection Division-Creates the bills and receives payment. Usually the County Assessor, except in some small counties.<br />State is constitutionally prohibited from taxing Property.<br />Players<br />Law Office of Deborah L. Crain, P.C. 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  4. 4. Appraisal District appraises all Real and Personal Property in the county and arrives at a total value.<br />Taxing Unit decides how much revenue they need and sets a Tax Rate (published yearly in the newspaper).<br />Collector’s formula to determine your property’s tax: Value x Rate = Tax<br />Tax Process<br />Law Office of Deborah L. Crain, P.C. 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  5. 5. Appraisal phase January 1-May 15<br />When is value determined (Jan 1)<br />Incomplete construction is prorated<br />This is important because you need to determine whether or not the property is valued at the prorated value or the full value<br />Notice of Appraised Value sent – the county is not required to send it if there is no change in the value<br />Equalization and Review Phase May 15-July 25<br />May 15 Protests Begin<br />Most counties have information about your property on their website<br />Appraisals for formal appeal hearing; Zillow might have good info for informal discussion<br />Protest must be filed before June 1 (no protest means you accept the tax)<br />An exception is the clerical error – 25.25 Motion<br />Assessment Phase July 25-October 1 (Take appraisals and then determine the corresponding tax amount. The tax bills are due by October 1)<br />Collections Phase October 1-<br />Delinquent date Feb 1 of following year<br />Key Dates<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  6. 6. The price at which a property would transfer for cash or its equivalent under prevailing market conditions if:<br />On the market for a reasonable time for the seller to locate a buyer<br />No Hidden conditions that would change the price if they became known<br />Neither buyer nor seller is looking to maximize their gains and neither is in a position to take advantage of another-arms length transaction<br />Definition of Market Value<br />Law Office of Deborah L. Crain, P.C. , 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  7. 7. Cost<br />Estimate cost of replacing or reproducing improvements<br />Subtract Depreciation<br />Add land Value – (land value is determined by market approach)<br />Market-Most common in Texas<br />Comparables<br />Requires an active market to be effective – this is what is difficult about today’s market because there are so many foreclosures (Latter and Blum Executive)<br />Works least for very unique properties – good exception is a home that is overbuilt for the neighborhood (10,000 square foot home in an neighborhood that the next highest square foot home is 6,000 sq. ft.)<br />Income<br />Determine properties net annual income<br />Determine Capitalization rate (the rate of risk associated with the property)<br />Divide net annual income by cap rate to arrive at property value<br />Appraisal Methods<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  8. 8. Mandatory Homestead<br />Persons who Qualify for over 65 and Disabled may only receive only one.<br />Property Tax Exemptions<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  9. 9. Optional-On top of Mandatory<br />Units may offer one, all or any combination of the 3 exemptions<br />Persons who qualify for over 65 and Disabled may receive both.<br />Property Tax Exemptions<br />Law Office of Deborah L. Crain, P.C. , 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  10. 10. Texas veterans who receive100% disability from the VA receive100% exemption on property taxes. (Effective 2009) (If the property is owned jointly, then it is applied to their ownership interest)<br />Foreclosures or low-end sales because of the economy in a neighborhood cannot be excluded from comps. (Effective January 1, 2010)<br />Residential appraisal must be based on market value rather than highest and best use. (House surrounded by commercial) (effective January 1, 2010)<br />To qualify as a comparable, sale must have occurred within the previous 24 months of appraisal date (effective January 1, 2010)<br />Recent Changes in the Law<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  11. 11. Trends-Moving out to the burbs/Moving back inside the Loop<br />Government Intervention<br />$8000 New home buyer program-Artificially keeping home prices high<br />Artificially Low Interest Rates<br />Deficit Spending – government printing money, causing inflation can artificially affect FMV<br />Easements – Any kind of restriction can affect value, either positively or negatively (Homeowner’s Restrictions)<br />Deed Restrictions<br />Fair Market-Disruptions to Market Value<br />Law Office of Deborah L. Crain, P.C. , 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  12. 12. Prepare, Prepare, Prepare<br />Ask the CAD to explain how it arrived at its appraised value. <br />Ask the CAD for all information they used in preparing your appraisal. (There may be some cost)<br />Check all lot and building measurements for discrepancies<br />Ask the CAD for records of similar properties<br />Get your own Appraisal done by an independent Appraiser<br />Are there any hidden defects the CAD is not aware of? (Pictures can be good evidence)<br />How to file an Appeal<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  13. 13. The CAD must give you 15 days notice of a hearing<br />After a hearing date is set, ask for all documents and evidence it plans to present at your hearing<br />Consider hiring a professional to present your case (most work on a contigency fee basis)<br />Just the facts, ma’am.<br />When Hiring an attorney – make sure they know enough about property tax to fairly represent you<br /> Should the ARB rule against you, what is the next step?<br />Binding Arbitration<br />File Suit in District Court (within 45 days of the ARB decision; chief appraiser must file notice of intent wiith ARB within 15 days)<br />Going Before the ARB<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  14. 14. Taxes must not be paid delinquent (Feb 1), or you lose many of your appeal rights. Here are a few reasons you may appeal late. These appeals include the current year and 4 prior years:<br />Clerical Error; V.T.C.A, Tax Code § 25.25<br />Appraisal is 1/3 higher than its market value (Benson Chevrolet v. Bexar Appraisal District, 242 S.W. 3d 54 – Tex App.-San Antonio 2007 – 41.41 appeal is not necessary if property owner files a 25.25 appeal before the taxes become delinquent to correct error, sometimes known as a substantial error) (This means that if TP paid timely they can go back in time to get an overpayment. Example: 2007 home under construction but valued as if it was fully complete. TP received a refund check in the amount of $16,000.<br />Failure to notify you of changes in your appraised value<br />Including property on the rolls that should not have been included.<br />If there was no notice of the appraised value or the tax bill itself, you may be able to assert that there was no constitutional due process – Aldine Independent School District v. Connie Ogg, 122 S.W. 3d 257 (Houston – 1st Dist. 2003). (Where there is no delivery of the required notices, there is no entitlement to penalties and interest.) <br />Late Protests<br />Law Office of Deborah L. Crain, P.C., 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  15. 15. V.T.C.A., Tax Code 33.01, et seq.: Late fees and Penalties add up fast. Even if the tax amount is in dispute, it is best not to allow the tax bill to become delinquent.<br />Taxes become delinquent Feb 1 of following year.<br />Feb 1 penalty is 6% (max of 12%) increases by 1% each month<br />Feb 1 1% interest, increases by 1% per month forever<br />July 1 the Assessor may include additional penalty up to 20% to cover the fees of hiring an attorney.<br />Delinquency<br />Law Office of Deborah L. Crain, P.C. , 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />
  16. 16. Talk to both your business and individual clients and remind them to check on the values of their property. This is a good way to add value to the relationship that you have with your client. <br />Closing<br />Law Office of Deborah L. Crain, P.C. , 10707 Corporate Drive, Suite 126, Stafford, TX 77477 (281) 565-5777 WWW.DEBORAHCRAINLAW.COM<br />

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