Now that the Texas property tax protest deadline has passed, taxpayers will start to see the first results from challenging their appraisal district’s values. While it is important for every homeowner and business to attempt to lower their property taxes through this technique, not every reduction is created equal. While informal appeals are a great way to score a reduction on taxes, taking the first offer available can prevent a taxpayer from exploring more options further down the line. In this article, we will cover what you should do when offered a settlement right out of the gate.
The Informal Meeting
We have already covered this in detail in a previous article, but we will sum things up here. This is the first meeting that a taxpayer has after filing their protest. In this meeting, you will meet a representative from the appraisal district. You will get to present your portfolio of evidence and argue for a reduction based on the grounds you have chosen. This is a simple meeting, and should not be argumentative in any way. It is a simple statement of facts, and having an excellent collection of evidence should do all of the talking for you. If everything goes well, you should be offered a settlement to reduce your taxable value. This could be during the meeting, after filing an online appeal, or shortly after.
The vast majority of Texas property tax protests are resolved informally. While certain high-dollar counties, like Travis or Fort Bend, tend to go to later steps, the average county usually sees an adequate offer at this stage. Unlike later stages, the relative simplicity of the informal meeting means that anyone can take part in the process, making it instrumental for working families, seniors, and other vulnerable property owners. In some counties, such as Bexar, over 90% of informal appeals result in a reduction.
The Settlement Offer
Whether it was achieved through a meeting, online, or over the telephone, a successful informal protest results in a settlement offer. This is an adjustment to your taxable value, which can often lead to lower property taxes. These decreases do not affect the resale value of your home; they simply get the appraisal district’s value in line with what the property is actually worth. Since informal protests solve paperwork issues, as well as challenge values, getting a settlement is usually a big step in the right direction.
When you get the settlement, it can be tempting to take it right away. Instead, it should be considered on its own merits and compared to what you were trying to accomplish. It is common for a low adjustment offer to come first. This can be negotiated, which you should do if the reduction seems inadequate. While determining what is considered adequate may not be clear, you should have a goal in mind before taking any offered settlement. Remember, accepting an offer means closing the door on any future challenges, be they formal hearings or even lawsuits.
Things to Consider
It is important to go into the settlement process with a figure in mind. This should be backed by your evidence, rather than wishful thinking. After all, a protest is about correcting errors or inaccurate values, not simply about lowering taxes. Review your evidence and determine what an acceptable outcome is. It is fine to have some wiggle room, so setting a floor for an offer slightly below your expectations can be acceptable. However, this does not mean that you should accept a lowball offer.
Do the Math
Remember that your protest will change the taxable value of your property, not the tax rate. If you are given a reduction settlement, be sure to keep this in mind. For example, a home worth $300,000 with a decrease of $20,000 and a tax rate of 2.20% would translate into a tax savings of $440. Knowing this formula helps you decide if the settlement you are offered meets your needs. While tax rates vary every year, and there is no central one for a county, having a general idea of the tax rate will help you get an accurate picture of how much a reduction could save you.
Go by What Your Evidence Says
Your expectations for a settlement should be based solely on what your evidence shows. Rather than starting with a goal in mind and working back from there, you need to focus exclusively on what you can prove. If your evidence shows that your home is overvalued due to deferred maintenance, damage, or general wear and tear, then the costs of repairing that damage should be factored into your property value. If you have several sales records showing that your home is overappraised, then that should give you a solid baseline to tailor your expectations. The same goes for protests based on unequal appraisal.
Knowing your evidence and your expectations offers a two-fold benefit. First, it lets you know the general ballpark that you can target for a reduction. Second, it lets you know how strong your evidence is if you wish to take your case to a formal appeal with the appraisal review board (ARB). The ARB requires strict evidence, so you should only target moving to the next step if your evidence backs up your case and paints the picture you wish it to. If you know your evidence well, you can make an informed counteroffer to the appraisal district before moving on to the next level, often landing a larger reduction.
When to Accept the Offer
With your baseline value and savings in mind, you will have a better understanding of whether an offer is acceptable or not. Obviously, if the offer meets or exceeds your expectations, then it is best to accept the offer right away. If the offer is less than what you’re hoping for, but is still within your wiggle room, then it should be considered. Remember, rejecting the offer means going to the ARB, which will take more time, effort, and evidence. This should be factored into the decision as well. If you feel that your evidence would also result in only a minimal increase in savings at the formal level, then it is best to take the offer.
When to Reject the Offer
Many appraisal districts are notoriously stingy when it comes to reductions, which could mean a lowball offer that they are unwilling to move from. If the offer is significantly different from what your evidence indicates, then it is worth trying to take your case to the ARB. In many counties, the ARB will offer a better outcome than simply negotiating with the appraisal district. As with anything associated with property tax protests, it all hinges on the strength of your evidence. If your evidence is strong, including repair estimates, sales records, photographs, and more, then it can be worth it to take the fight to the next level. Businesses, in particular, often target the ARB to get even bigger savings, as they often have more value at stake than homeowners.
Settlement Effects Beyond Just Savings
Your settlement can have a lasting impact on your tax bills for years to come. It establishes the value of your home or business in the eyes of the appraisal district, setting a new baseline for the future. A good reduction can be built upon with later appeals, and compounding victories tend to bring in more savings as time marches on. For homesteads, there is the cap, which prevents the appraised value from rising more than 10% in a year. By setting a lower baseline, this means slower growth in the future, as the value of the home can never increase beyond the cap on a yearly basis. Since property values are tied to the real estate market, this alone can grant substantial savings and protect homeowners from large spikes. This means that it pays to get the most accurate reduction possible.
O’Connor Offers Professional and Aggressive Representation
Though the deadline has passed for most Texans, you can still sign up for professional representation. Whether you are preparing for your informal meeting or are looking to take things to the ARB, having an experienced firm in your corner can make all the difference. We at O’Connor differentiate ourselves from most firms by aggressively standing up for our clients, and will always take your case to the highest justifiable level. We often reject lowball informal offers to take our clients to the ARB level, where we have an excellent track record.
When you sign up with us, you will be given a client success consultant. This means you always have the same point of contact to talk to, one that is invested in you and your case. They will act as your advocate with hearing specialists, attorneys, and any other experts needed to get you a reduction. We can also send out a concierge team member, who will come out to your home or business to assist you. They can answer any questions and will examine your property for any issues that can help the case. There is no cost to join, and you will only pay a contingency fee from your savings if we are able to lower your taxes.
Frequently Asked Questions About Tax Settlements
Q: Will accepting a settlement lower the resale value of my home?
A: No, appeals only lower property values in the context of taxation and have no impact on resale value. They can even be an asset, as tax bills are often shown on realtor sites, and getting a lower one can often make a home stand out compared to others in the same area.
Q: What is the appraisal review board?
A: This is a trio of experts that acts as an impartial arbiter between the appraisal district and the taxpayer. They all have experience with real estate and taxes, and will rule on the side of whomever has the best evidence. Unlike informal meetings, these are structured, and often take much longer.
Q: Can there be a settlement between the informal meeting and the ARB hearing?
A: Yes, many appraisal districts will make another offer before the hearing with the ARB takes place. This is to save time for the district, and usually occurs when you have strong evidence on your side.
