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Appealing Property Taxes for your Home: The Hearing Process

March 31, 2006

Appealing Property Taxes for your Home: The Hearing Process

Written by Pat O'Connor, MAI

Attending the hearings

Even if you have properly prepared for your property tax hearing, be aware that the property tax hearing process can seem arbitrary. Depending on the luck of the draw, the appraiser chosen to meet with you at the informal hearing may either be generous or stingy in his settlement negotiation. Likewise, the ARB panel chosen to hear your appeal may be one that is more sympathetic to property owners or to the appraisal district. The personal nuances surrounding the process to resolve appeals can continue through either the binding arbitration or judicial appeal phases of the tax appeal process. The arbitrary elements are an important component of why you should appeal annually or hire a consultant to appeal annually for you.

Informal hearing

Since you have prepared for the hearing, you will likely receive an offer to settle. Most homeowners who attend a property tax appeal hearing do not have appropriate evidence for the hearing. They are inclined to say, "my taxes are too high" or "statistics show homes in my area went up 3% last year, but my assessed value went up 10%"!

At the hearing you will first meet with the appraiser. Spend three to five minutes of polite conversation developing a level of rapport. The appraiser is not opposed to reducing your property taxes. Think of the meeting as a bridge. You need to provide the appraiser a basis for adjusting your assessed value. The appraiser does not mind adjusting the assessed value; he just does not want to get fired or reprimanded for making an inappropriate adjustment. Act as though the appraiser is your friend and not an enemy.

Politely explain the basis for your adjustment. Give the appraiser a copy of your evidence and explain it in a methodical way. The appraiser will review your information and the information he has available, and will then likely make an offer to settle. Consider the appraiser's offer and explain why your evidence is better than his evidence, and again request your value or a value between your value and his value. You will quickly learn the lowest value the appraiser is willing to accept. At this point, you need to either agree to that value or proceed to the formal ARB hearing. If you settle the appeal at the informal level, you will not be able to pursue an ARB hearing, binding arbitration or a judicial appeal. However, it does resolve the issue in a timely manner.

Appraisal review board (ARB) hearing

Although most property owners are successful in ARB hearings, there are serious and material problems with the ARB process in Texas. The basis for the problem is the appraisal district controls the ARB. Some consultants have quipped, "the appraisal review board is a panel of three independent citizens hired and paid by the appraisal district." ARB members want property owners to have a fair hearing and want to give appropriate consideration to the appraisal district's information. While there are problems with the ARB process, you will probably be successful in obtaining a reduction if you have evidence and approach the hearing in a friendly manner.

Mechanics of the hearing process

The steps of the hearing process for the typical county are delineated below. 1. Introduction of the two parties at the hearing 2. Explanation of the hearing process 3. Property description (address any errors in the description of your property after the appraiser reads their description of your property) 4. Property owner presentation 5. Questions from the ARB panel members 6. Appraisal district presentation 7. Questions from the ARB panel members 8. Rebuttal and closing evidence from the property owner After the ARB makes its decision, the hearing is completed. (At this point, the ARB decision is not open to negotiation. Therefore, getting upset or expressing your frustration will not do change the final decision.)

Your presentation at the ARB

Whether you are appealing on unequal appraisal, market value, or addressing errors in the appraisal district's records for your home, you should be able to prepare a clear, concise presentation that is three to five minutes in length. Since the entire hearing only lasts 15 to 30 minutes, your presentation should not be more than 10 to 20 minutes or it will irritate the ARB members. Even appeal hearings for $10,000,000 commercial properties only last 15 to 30 minutes. In addition, you should have five copies of all information you will be using in your presentation (one for each ARB member, one for the appraisal district appraiser and one for yourself).

If you have requested the House Bill 201 information for your property and the appraisal district appraiser presents information not included in the bill package, wait until it is time to give rebuttal evidence before addressing the issue. When you are giving rebuttal evidence and closing remarks, ask the ARB to sanction the appraisal district for using inappropriate evidence by concluding to the value you requested.

Next, listen to the rebuttal presentation by the appraisal district appraiser and make notes and determine how to respond. Do not interrupt the appraiser. Since you obtained the House Bill 201 information, you should know in advance what the appraisal district appraiser is going to say. Limit your rebuttal comments to two to five minutes.

Options after the ARB hearing

If you had an ARB hearing for your property tax appeal, you have the following options: 1) Accept the value as final for the year, 2) Request binding arbitration if the assessed value after the hearing is equal to or less than $1 million and the only issue is market value, 3) File a judicial appeal regarding either unequal appraisal and/or market value, and/or 4) File a suit utilizing Texas Property Tax Code 41.45f if the ARB hearing was not legitimate. Property tax appeals are an iterative process. Reducing the current year value below the level set by the ARB will help to reduce the subsequent year's value. Consider the following example: assessed value is reduced to $1 million by the ARB. The owner can file a judicial appeal and further reduce the assessed value to $800,000. While "each year stands on its own", the reality is ARB members consider the prior year's value when conducting hearings. Given the prior example, the ARB will consider either $800,000 or $1 million as the base value in the subsequent year's hearing. Hence, if the owner does not file a judicial appeal, the ARB will be unlikely to reduce the subsequent year's value to or below $1 million since "properties always go up in value." (This attitude seems prevalent at ARB hearings. ARB members are reluctant to reduce the value below the prior year's value.) On the other hand, if the owner does file a judicial appeal, the ARB will consider $800,000 to be the floor value in the subsequent year's hearing.

Binding arbitration -- Section 41A of the Texas Property Tax Code

Effective September 1, 2005, the Texas Legislature amended the Texas Property Tax Code to allow property owners the option of appealing an ARB decision for a property with a value of $1 million or less using binding arbitration. The arbitrator can only consider market value at a binding arbitration hearing.

When compared to a judicial appeal, advantages of binding arbitration include a lower cost, informal process, speedier resolution and the loser pays provision. Also, the property owner does not have the burden of proof at a binding arbitration hearing. While the appraisal district hires and pays the ARB members, the arbitrators will be independent. After attending binding arbitration training in March 2006, I believe that the arbitrators will be truly independent from the appraisal districts. Although the appraisal district hires and pays ARB members, arbitrators are not hired and supervised by the appraisal district. The Texas Comptrollers office will fund remuneration for arbitrators (which is paid by the losing party).

Disadvantages of binding arbitration include, not being able to appeal on unequal appraisal and it only applies for accounts with an assessed value of $1 million or less.

Judicial Appeals - effective but costly

Judicial appeals are an effective and essential tool in appealing property taxes. Unfortunately, judicial appeals are not financially feasible for most homeowners. Filing fees alone are about $300. It would cost about $2,000-$5,000 for a homeowner to pursue judicial appeal. The expense is simply too much compared to the possible tax savings for the average homeowner. (For example, based on a median home value of $150,000, a 3% tax rate and a 10% reduction, a homeowner could save $450 during a judicial appeal.)

Homeowners with an assessed value between $750,000 to $1,000,000 or higher may be able to hire a property tax consultant or an attorney on a contingency basis. It is possible to appeal on either unequal appraisal or market value using a judicial appeal. In addition to the high costs to have a judicial appeal, the process is also more formal and time-consuming than binding arbitration.

Summary

Texas property taxes are substantial and unavoidable. You can minimize your property taxes by appealing annually and considering all levels of the appeal process. Minimizing your property taxes is an iterative process. Be persistent and you will have a value in the lower work quartile of the range of value!
Read more about Preparing for the Hearing.
Read more about Appealing Property Taxes for Your Home.


Patrick O'Connor, a designated member of the Appraisal Institute, is president of O'Connor & Associates. The firm, in business since 1974, specializes in real estate appraisals, research, and state and federal tax reduction services nationwide. With offices in Houston, Dallas, Los Angeles and Newport Beach, the firm employs more than 180 people. Patrick O'Connor is frequently acknowledged by national publications as a respected source of information on real estate. Visit www.cutmytaxes.com.

Copyright by O'Connor & Associates, 2006

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