The appraisal district uses a process called “mass appraisal” to value both houses and commercial property. Their valuation process is much different than the appraisal obtained by the bank for financing.
The appraiser hired by a lender will typically personally inspect both the interior and exterior of a house or commercial property as part of the process of preparing an appraisal. The appraisal district does not have the resources to personally visit each property.
There are 2,272 appraisers to value the 21,351,318 tax parcels in the state of Texas for tax year 2019, according to Texas Comptroller Glenn Hegar. In addition to valuing existing property, appraisal district appraisers also: 1) measure new construction and 2) conduct property tax appeal hearings.
Most commercial properties are valued using the cost approach, generally considered the least reliable method to value real estate. The cost approach is based on the following:
1) Replacement cost to build new building,
2) Less all forms of depreciation (physical, functional, and economic)
3) Plus, land value.
It is impossible for Texas appraisal districts to correctly value commercial property to within 10% of the correct value. This is why property owners should file an appeal and review the accuracy of the appraisal district’s value annually. Owners can appeal on both market value and unequal appraisal.
For questions call our tax experts at 713 290 9700, or visit us at www.poconnor.com.