Taxing Error - Can you believe there are 16 Houses in Zip Code 77004?

Appraisal districts use a process called mass appraisal to value hundreds of thousands of houses. In Harris County, they value about 1.2 million houses each year, using a very limited staff. Most of the property inspections mandated by state low (every three years) are now done using aerial photography! Seriously, how much can you tell about the condition of a house viewing an aerial photograph? Since HCAD is not able to physically inspect the subject property in person, this limits the quality of their data.

In many cases, the computer-generated estimate of market value is within 10% of the true value. However, in about half the cases the value set by the appraisal district is either 10% high or low, because of defects in the mass appraisal process.

We believe about 30,000 homes in Harris County over-taxed by 50% or more in 2014. And about 5,000 homes in Harris County over-taxed by 100% or more. Between 200,000 and 300,000 Harris County taxes are over-taxed by at least 10%.

While this may seem incredible, it is due to the errors in appraisal district property records, inaccurate data regarding cost, depreciation and comparable sales. Further, most property owners have limited knowledge about the appeal process and believe myths about appealing property taxes. They do not understand the HCAD jargon of grade, CDU, level of remodel, land lines, etc. Compounding the problem is a reluctance to revise HCAD records. If an HCAD appraiser agrees a property is over-taxed, he will change the value. However, to correct fields of data such as grade, condition or land value is highly unusual. So the same problems occur from year to year, frustrating home owners and causing HCAD a consistently high appeal value. If Harris County Appraisal District would make updating the records part of the appraisal process, it would reduce the number of annual protests.

Since HCAD targets 100% of market value for their homes, half of all houses are over-taxed and half are under-taxed. The result is there are at least 200,000 houses in Harris County over-taxed by at least 10%. Following is a list of some of the most egregious examples of homes over-valued Zip Code 77004. If you recognize the address, please call the owner and make sure they protest.

Property Zip Code

Property Address

Assessment Ratio

2014 Market Value

Gross Sale Price

Owner Name

77004

2210 Sauer St

245%

$73,638

$30,000

Yellowstone Academy Inc

77004

3710 Cleburne St

184%

$91,798

$50,000

Shen Dongli

77004

3354 Simmons St

160%

$41,244

$25,800

Bryant La Salle

77004

2311 Rosedale St

159%

$263,387

$165,299

Wells Fargo Bank Trustee

77004

3406 Hadley St

146%

$39,293

$27,000

Bookman Olgia V Estate Of C/O Barbara Jackson

77004

3347 Rosedale St

142%

$100,520

$71,000

Housing & Urban Development

77004

2806 Palm St

135%

$127,992

$95,000

Legacy Growth Investments Inc

77004

2233 N Macgregor Way

127%

$273,588

$215,100

Taing Pheng L

77004

2917 Wichita St

126%

$79,184

$63,000

Prasad Ranjana

77004

5416 Palmer St

125%

$115,452

$92,000

Cooney Michael

77004

3313 Calumet St

124%

$264,989

$213,509

Boring Todd D & Shondra M

77004

2208 Riverside Dr

120%

$268,878

$225,000

Wesley William B

77004

1305 Anita St

117%

$610,714

$520,000

Popowitz Samson

77004

3828 Gertin St

115%

$98,670

$85,789

S & F Home Buyers LLC

77004

2712 Brailsfort St

115%

$68,900

$60,000

Diego Maria

77004

2320 Chenevert St

112%

$335,761

$300,000

Arancibia Lester

Since the property taxes are paid by the mortgage company for most home owners, the pain point for the home owner is about one year too late. When they receive the notice their monthly payment is increasing by $100 or $200 or more per month, the appeal deadline has likely passed. The property tax appeal deadline in Texas is May 31, or the following workday if May 31 is on a weekend. However, the owner will not be aware of the consequence until early next year.

The mortgage payment will not likely be increased until after the current year taxes are paid. For example, if your home is grossly over-assessed in 2014, the monthly payment will likely be adjusted in the Spring of 2015. But the deadline to protest your 2014 property taxes is May 31 (actually June 2 since May 31 is on a weekend). Hence, the deadline occurs almost a year before the home owner learns there is a problem.

There is really no meaningful relationship between the methodical work done by an independent fee appraiser and an appraisal district appraiser. The fee appraiser typically inspects and measures the subject property, so he has accurate data. He also personally visits each of the comparable sales to see if they are really comparable.

For homes build before 1980, an appraisal district appraiser has almost never seen the inside of the house. They just guess at the quality of construction and condition. For homes built after 1980, the appraisers attempt to measure them. However, they are often not completed when the appraisers measure them, leading to errors including size (by double counting vaulted ceilings), and level of finish. Curiously, appraisers at Harris County Appraisal District give equal credence to their data on homes built before and after 1980.

The appraisal districts errors regarding your property are compounded by errors in their information regarding comparable sales. The appraisal districts commit several errors systematically that tend to cause them to over-tax home owners. First, properties that sell are typically prepared for sale by putting them in prime condition. Properties that sell have often been recently painted have new flooring, a new roof, a new HVAC and other similar items. If a buyer was considering buying a typical house not prepared for sale and one that had been prepared as advised by the Realtor, the buyer would certainly pay more for the latter. HCAD terms the cost of preparing a home for sale "maintenance" and does not recognize any difference in condition between a recently sold house and a livable house. Harris County Appraisal District also does not recognize seller concessions, which reduce the true sales price.

A second serious problem is that appraisal districts tend to use sales that have been remodeled to value houses that have not been remodeled. Incredibly, the insular culture at some appraisal districts, including Harris County Appraisal District, is they require you to prove your house has not been remodeled. This is simply a red herring to cover up the extensive errors in their evidence regarding comparable sales. There is no requirement that the property owner prove the appraisal districts records are correct. If anything, the appraisal district doubting the accuracy of their evidence about your house should undermine their credibility on other issues. If the appraisal district is saying their evidence about your house may not be accurate, why should we give much consideration to any of their other evidence?

In addition to errors regarding the information about your house and the errors regarding the comparable sales, the model used by the appraisal district is imperfect. There is no model that can consistently value houses with precision.

Texas law requires property owners to file a property tax protest to be able to obtain the evidence regarding their house. Protest both market value and unequal appraisal and include a note asking the appraisal district to make their evidence available two weeks prior to the hearing. The protest form is available at http://www.poconnor.com/pdf_forms/41-44.pdf

In many cases, given the large number of substantial errors in valuing houses, the appraisal district’s evidence will clearly show the property is over-assessed. It is critical that you protest prior to May 31, or you will not be able to get the information and determine if you are taxed fairly. Since over 200,000 houses in Harris County are over-taxed by at least 10%, encourage your family and friends to protest, so they at least get to see the appraisal districts evidence.

After you protest and obtain the appraisal district’s information, one of the first priorities is to see if their evidence is accurate for your house. Then check to see if the sales data is accurate.

The data used for analysis was all sales of houses in Harris County that occurred during October 1 2013 to March 31 2014, for which we had a purchase price and a 2014 HCAD market value. The only records that were eliminated were those where there was a major discrepancy between the Realtor MLS data and the HCAD tax roll regarding the size of the land and / or building.

For more information, contact Charlissa Holman at 713 375 4367 or Patrick O’Connor 713 822 8613.

Patrick C. O'Connor has been president of O'Connor & Associates since 1983 and is a recipient of the prestigious Mai designation from the Appraisal Institute.