One of the biggest questions people new to protesting have in learning how to protest property taxes is learning how to choose comparables. This article helps people learn exactly how to do that.
The biggest recommendation we have is to “do things the easy way.” 90% of the time, you can pick the 3 closest houses that the county selects. If the county gives you 10-15 houses that they claim are close to yours, probably 3 are actually usable for you.
The way to figure out which 3 is to look at all 10 on the online property websites. Look at the conditions of each house and see which one is closest to your own. Which house was built in the same year as your house? Which one is the same square footage, including any extras? For example, if your house has a finished attic, do any of the 10 have a finished attic as well?
The goal here is to find houses as similar as possible to your house in all aspects. Maybe you are looking at 2 houses, and one is a 1-story house, and the other is a 2-story house. Your house is a 2-story house, so you would pick the 2-story house, if they were the same size. But if the 1-story house was the same size as your house, and the 2-story house is twice as large as yours, then you would likely want to pick the 1-story house because the adjustment you would need to make to adjust the 2-story house would be bigger. The general principle is that the bigger the adjustment you need to make, the less accurate the valuation.
You want to pick the 3 most comparable houses, if possible. Probably 4 of 10 will not have pictures, so this is potentially a lot easier than it sounds – just pick the ones with pictures of the interior available! However, you will also have a use for the LEAST comparable houses, so rank all the houses you look at in order of comparability to your house.
The LEAST comparable houses are what you use to discredit the county’s analysis by pointing out that they never should have been used in the first place. For example, if their lot is 300% larger, or if their house is 50% your square footage, or 300% your square footage, etc. If one house is on 3.6 acres, on a hill top, and has a commanding view of the entire valley you are in, clearly it’s more valuable, if your house has no view and a 0.25 acre lot! Try to factor in everything when you make a decision on which house is comparable and which is not – view, lot shape, lot size, slope, house size and type, year built, square footage, other storage space, renovations, etc – all of it matters.
So now we know how to protest property taxes by choosing the right comparables. The next step, of course, is how to adjust those comparables.
How to Protest Property Taxes
Many homeowners want to know how to protest property taxes. Here’s my take:
Basic Strategy of How to Protest Property Taxes
1) Pick a subset of the county’s comps and adjust it to reality.
2) Discredit the county comps by showing that X and Y houses don’t belong, so their analysis is bad.
3) Use a market adjustment factor as a “neutral” value that aligns closely with your valuation. If the market in Austin went down 5% according to Bloomberg/Zillow/whatever site, then your home’s value is (1-5% = 95% of last year’s value according to this metric. Which hopefully lines up to your value. To get a better result, adjust the market to be your neighborhood/local municipality.
The combined effect of doing the above makes it so: 1) You have a case that is objectively more adjusted to reality (of course you MUST include pictures so the board can see what you see!), 2) the county’s case is a computer program that doesn’t work right, 3) other market watchers’ professional opinions agree with yours.
It’s hard for an appraiser to beat this combo – they would have to spend a LOT of time. Especially if you are using their comps (comparable houses) – if they show 10, pick the 3 most similar to yours and adjust their valuations to reality. Out of the 10, 3-4 will be comparable, 3-4 will be unknown with no pictures of the interior, and 2-3 will be ridiculous. If you go through each property, you can classify it as one of these buckets.
The Trick
You take the comparables and plug them in to your analysis. Then you take the non-comparable, ridiculous ones and show why they are a bad match for your house. The county can’t challenge the houses – because THEY picked those houses, so discrediting you means discrediting themselves.
This makes it so that the county has to spend SERIOUS effort to beat you – and they don’t have the time if they’re fighting 30 protests a day!
Using this strategy (and a combination of other factors, including the price I actually paid, and luck!) – I secured a $200K reduction from what the county wanted to charge me ($350K valuation vs $550K), so I do think this process works. But it was so time consuming, I developed my own $49 program that you can use to speed the process. I cut my time spent from 80-100 hours combined for adjacent properties to just 2-3 hours this year. And the analysis and comparison charts are better.
Hopefully, this article helped you learn how to protest property taxes. In another article we’ll explore the edge case: what if the county has 10 comparables that are ALL overvalued?
Why Homeowners Win More than Property Tax Protest Companies
What many homeowners do not know is that there is clear data to show that homeowners actually do win more often and save more money than property tax protest companies do. The question is: why? While we can’t know EXACTLY why in every case, we can deduce the general reason.
What we know is that the appraiser companies have the same limitations as the rest of us – if they work 8 hours a day Monday – Friday, with about 4 holidays from April 1 to Aug 29. That’s ~105 days X 8 hours a day = 840 hours, in round numbers. At 4 hours on your case (including the preparation, waiting at the appraisal board, making the case, etc), that’s 205 clients per assessor for the year. To make $60K/year – without including other costs, they need to save each of those clients roughly $30K (assuming 1% of the market value is charged).
That math does not work, as we know from the above linked article that the assessors save perhaps $16K – about 1/2 of the target. The only way they can make these figures work is by having more clients and cutting the time spent per case – so you’re getting less than 2 hours of attention.
But it gets worse – their salaries are $60K on average, not including overhead and costs – so they need $100K to get that $60K (if not more). So they need to serve even more customers per assessor. We’re down to a ballpark of an hour.
In that hour, no matter how good they are, they can’t just: a) understand the neighborhood, all the houses and their conditions, b) write a report up, c) make the case to the board (up to 15 min per case!) and take care of all the other tasks if they were doing this manually. And people aren’t machines – they check Facebook, watch Youtube, etc. Actually looking at your property well is just too slow! So, they HAVE to default to what the counties do – mass appraisal models that by definition don’t really take into account YOUR specific property or the neighbors’. This way, they can spend all day at the board and spend just 20-25 minutes or so on your case – which makes this a profitable business for them.
The problem is, if they don’t take the fact that your neighbor’s house sold last year because it was remodeled, and the county is revaluing your house even though your house WASN’T remodeled, how can they win? The only way to do this is to get pictures and evidence by driving past the property (pictures online may not be accurate as well), which, again, takes TIME.
This explains why agents don’t do well – but why do homeowners win more than property tax protest companies? Because homeowners know the area and spend the time. To give a personal example, I have 4 properties (3 vacant lots and 1 house), so it took 80+ hours last year for me to feel confident of a win – but I did win over 36% off the county’s price to below “market value”. Still, the amount of TIME it took was why I developed this software – to be able to make my appeals faster.
The question is: is $49 worth saving nights and weekends of your life, while potentially improving your odds to win and the savings? What if you could spend just 2-3 hours entering info and have a rock-solid appeal? For the first time, spend just $49 to enter the important details of your property and the neighbors – QUICKLY. Your data is used to generate a report that actually makes sense – taking things like, for example, the county comparing totally undeveloped land against a fully cleared lot with a concrete foundation and a half-built house (yes, it happened to me!) into account. Which is another reason that homeowners win more than property tax protest companies – I had the time to look into each property and realize “This does not make sense!” I hope you can join me and help improve this software to save yourself time.
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