Property taxes after purchasing new home

[longcat]

I've got a question I was hoping the knowledgeable people here could help me with. We're going to close on a home in West U area soon that has a current HCAD appraised value (and market value in HCAD) much lower than the price we are paying. Could someone explain to me what will happen to the appraised value next year as I see several potential options based on some preliminary research:

1) appraised value rises to purchase price - I would have thought this was what happens for sure, except it didn't in my last house purchase.

2) appraised value rises to purchase price, but the 10% yearly cap keeps it from going all the way up.

3) appraised value rises in line with some neighborhood value index or the like

And before I get slammed for buying a house without knowing what the true financial cost is likely to be, I budgeted for worst case scenario where the appraised value rises to the purchase price.

Thanks for any insight

[gto250us]

I've got a question I was hoping the knowledgeable people here could help me with. We're going to close on a home in West U area soon that has a current HCAD appraised value (and market value in HCAD) much lower than the price we are paying. Could someone explain to me what will happen to the appraised value next year as I see several potential options based on some preliminary research:

1) appraised value rises to purchase price - I would have thought this was what happens for sure, except it didn't in my last house purchase.

2) appraised value rises to purchase price, but the 10% yearly cap keeps it from going all the way up.

3) appraised value rises in line with some neighborhood value index or the like

And before I get slammed for buying a house without knowing what the true financial cost is likely to be, I budgeted for worst case scenario where the appraised value rises to the purchase price.

Thanks for any insight

I think that #1 may happen, then again it may not. I have seen #1 happen. I think that #2 occurs after a new owner taker over, but you can be hit with a full increase on the first appraisal.

Plan for the worst, hope for the best.

[musicman]

I've got a question I was hoping the knowledgeable people here could help me with. We're going to close on a home in West U area soon that has a current HCAD appraised value (and market value in HCAD) much lower than the price we are paying. Could someone explain to me what will happen to the appraised value next year as I see several potential options based on some preliminary research:

1) appraised value rises to purchase price - I would have thought this was what happens for sure, except it didn't in my last house purchase.

2) appraised value rises to purchase price, but the 10% yearly cap keeps it from going all the way up.

3) appraised value rises in line with some neighborhood value index or the like

And before I get slammed for buying a house without knowing what the true financial cost is likely to be, I budgeted for worst case scenario where the appraised value rises to the purchase price.

Thanks for any insight

the cap won't come into play here since the homestead is lost during the sale. at MOST legally, it will be the purchase price. a friend down the street bought one and the county raised it to more than she paid. She protested with the purchase price and they lowered it to that. basically the county knows that many don't understand the process.

[jlt1988]

Here is the reply from HCAD on your topic. I emailed them about the same thing last year and I cut and pasted their reply into my Palm. You will find it below:

October 2005

We do use the sale price, but not necessarily will the value equal the sale price. It would depend on other sales in the neighborhood, did the buyer pay too much, was it arms length (not a foreclosure, family, distress sale, etc). We review values annually and depending on sales activity in a neighborhood, the value could change each year, decrease/increase based on sales. Our general reappraisal is every odd year.

[longcat]

Thanks for the responses. It sounds like I'll just have to sit tight and wait for HCAD's "magic 8 ball" to come up with a number. I guess anything less than the sales price will be free money, but it would be nice to have some budgeting certainty.

[musicman]

be sure and apply for your homestead too. otherwise you won't have a cap.

[westguy76]

be sure and apply for your homestead too. otherwise you won't have a cap.

when we bought our current house last year they raised the appraised value to what our purchase price was. roughely 0.065%

[longcat]

I've done some further research on this, which might be interesting to some people. I found an article that mentioned that HCAD gets sales prices from the MLS, so even if you don't fill out the little card they send you they will know what the sales price was for purposes of reappraisal. The article below mentions that some people (at the high end) are not reporting their sales prices to the MLS. I don't know how that is possible though as the listing agent has control over the updating, is required to do so by HAR rules, and has no incentive to not update the MLS (you might be able to talk 'your' buyers agent into it, but I can't see the seller's agent going for it as there is nothing in it for them.) Any idea how they are keeping the MLS for getting the sales price then?

http://www.chron.com/disp/story.mpl/metrop...ey/4327162.html

[KatieDidIt]

I just looked at our old house in Tanglewood. We had been able to keep it very low due to the fact we had lived there 10 years. The new owners got slammed for the full sale price the next year. But I think it also has to do with how closely HCAD is watching certain neighborhoods....or which way the wind is blowing...

[jm1fd]

I've done some further research on this, which might be interesting to some people. I found an article that mentioned that HCAD gets sales prices from the MLS, so even if you don't fill out the little card they send you they will know what the sales price was for purposes of reappraisal. The article below mentions that some people (at the high end) are not reporting their sales prices to the MLS. I don't know how that is possible though as the listing agent has control over the updating, is required to do so by HAR rules, and has no incentive to not update the MLS (you might be able to talk 'your' buyers agent into it, but I can't see the seller's agent going for it as there is nothing in it for them.) Any idea how they are keeping the MLS for getting the sales price then?

http://www.chron.com/disp/story.mpl/metrop...ey/4327162.html

“…Sands Stiefer, the chief deputy at the Harris County Appraisal District, wasn't surprised at what I found.

The district, he said, has access to the data collected by the Houston Association of Realtors, but it is most reliable with mid-range houses.

"It is really easy to get data about the transactions from $60,000 to $200,000 or $300,000," he said. "Lower than that, transactions are often between individuals and not reported. Higher than that they often don't report the sales price."”

Not only are we talking about HAR data, but often times the sales price (or close to it) is on the deed because of the mortgage, and of course HCAD has the deed info.

[mpbro]

Interesting question. I posted a similar question to another topic.

If you overpaid for your house, I doubt you'd fully be exposed to the full tax burden. Since HCAD land values are computed by a formula (land square feet within individual subdivisions), your land assessment cannot rise unless the entire subdivision rises. Since you overpaid, it wouldn't be fair to increase land assessment for the entire subdivision. The rest of the slack would have to be taken up by the structure assessment. And frankly, HCAD won't increase the assessed value of a structure by, say, 30%.

All this IMO.

[mumbles]

Do they take into account that 6% goes to the real estate agent? That is a lot of money that really has nothing to do with the value of the house.

[jm1fd]

Do they take into account that 6% goes to the real estate agent? That is a lot of money that really has nothing to do with the value of the house.

Yeah...they do. They tax you on it! Terribly wrong, isn't it?

[banking214]

This is something you may want to look at as well. Did you go off of improved or unimproved taxes? Here is a good link: http://www.window.state.tx.us/taxinfo/prop...c04/ch11b3a.htm

[mumbles]

Taxing you every year for owning a home is terribly wrong. You don't own it, you just pay rent to the school district. Lose your job, lose your home.

Yeah...they do. They tax you on it! Terribly wrong, isn't it?

[longcat]

This is something you may want to look at as well. Did you go off of improved or unimproved taxes? Here is a good link: http://www.window.state.tx.us/taxinfo/prop...c04/ch11b3a.htm

Thanks for the information. Taxes were based on improved value, but the house has not had any work done, so there should not be a difference because of that.

Still awaiting the new appraised value from HCAD post sale. Does anyone know when to expect that notification? I think I have a potential case for appeal if it does increase substantially based on these facts:

-Original structure is unimproved from before sale.

-Whole neighborhood has been appreciating at a very fast clip, but it's all land value that's going up essentially.

I would think that HCAD would have difficulty increasing the land value for the entire neighborhood as dramatically as it has in real life (big assumption), but if true, then the only way they could get my value up to the sales price would be through increasing the improvement value as well, which I can appeal because nothing has changed about it.

So assuming the above, can I go into HCAD with the argument that they are low on the land value (which they won't change for the entire neghborhood just because of me), but high on the improvement value....and so my improvement value should be lowered and land value left the same???

[musicman]

Thanks for the information. Taxes were based on improved value, but the house has not had any work done, so there should not be a difference because of that.

Still awaiting the new appraised value from HCAD post sale. Does anyone know when to expect that notification? I think I have a potential case for appeal if it does increase substantially based on these facts:

-Original structure is unimproved from before sale.

-Whole neighborhood has been appreciating at a very fast clip, but it's all land value that's going up essentially.

I would think that HCAD would have difficulty increasing the land value for the entire neighborhood as dramatically as it has in real life (big assumption), but if true, then the only way they could get my value up to the sales price would be through increasing the improvement value as well, which I can appeal because nothing has changed about it.

So assuming the above, can I go into HCAD with the argument that they are low on the land value (which they won't change for the entire neghborhood just because of me), but high on the improvement value....and so my improvement value should be lowered and land value left the same???

If you just bought the house, HCAD will be using the paperworked filed at the county which usually has how much you paid for the home. Appealing that will be difficult because you paid a certain amount for the home and that is what they will probably place its value as.

As for the land value vs. the house value, there's less leeway on changing the land value because most likely all your neighbors will have similar numbers. The last couple of yrs I know my land value has gone up (as has my neighbors) and the value of the structure is decreased accordingly and then they apply 10% cap. Then you go in a protest, the value of your house goes down but the property value stays the same.

It isn't out of the question that the HCAD value is lower than the sale price, however the large majority of the time they do the easy thing and use the sale price.

[jm1fd]

Still awaiting the new appraised value from HCAD post sale. Does anyone know when to expect that notification? I think I have a potential case for appeal if it does increase substantially based on these facts

New valuation data comes out, IIRC, in March or so. Your market and appraised value should be what you paid for the property or more. Full stop. A transaction for the property occured on the open market and thus firmly established the market value, and the law says, yo' ass gets taxed on the market value.

Doesn't matter what everybody else's values are....if they are below market, then it is because they're capped, but they will eventually be brought up in line with yours if enough years go by.

[mumbles]

Land value going up is how they tax the poor people out of the neighboorhood. Look at the values in Spring Branch where they are building expensive homes. The land value can be more than the house value. This makes it easier to get the poor people in old homes to move. Eventually they can't afford their property taxes any more and they have to sell. I think this is part of why they want to keep property taxes.

[jscarbor]

Land value going up is how they tax the poor people out of the neighboorhood. Look at the values in Spring Branch where they are building expensive homes. The land value can be more than the house value. This makes it easier to get the poor people in old homes to move. Eventually they can't afford their property taxes any more and they have to sell. I think this is part of why they want to keep property taxes.

Land value going up is a product of land value going up. Property taxes follow. The reason we keep property taxes is because we don't have or want a state income tax.

[longcat]

New valuation data comes out, IIRC, in March or so. Your market and appraised value should be what you paid for the property or more. Full stop. A transaction for the property occured on the open market and thus firmly established the market value, and the law says, yo' ass gets taxed on the market value.

Doesn't matter what everybody else's values are....if they are below market, then it is because they're capped, but they will eventually be brought up in line with yours if enough years go by.

My question is more about the mechanism for bringing up my property to the established market value. The land value is set based on the neighborhood, so it seems like the improvement value is the only real variable at play that then absorbes all the rest of the increase needed to bring the total value up to the sales price, right?

[musicman]

My question is more about the mechanism for bringing up my property to the established market value. The land value is set based on the neighborhood, so it seems like the improvement value is the only real variable at play that then absorbes all the rest of the increase needed to bring the total value up to the sales price, right?

yeah basically. if your property went up this yr, if you go onto HCAD and look at your neighbors, they will most likely have also gone up accordingly.

[lwood]

My question is more about the mechanism for bringing up my property to the established market value. The land value is set based on the neighborhood, so it seems like the improvement value is the only real variable at play that then absorbes all the rest of the increase needed to bring the total value up to the sales price, right?

If I understand your question correctly, the land value could go up also. I'm thinking of inner city neighborhoods where lots are available and lot prices are rising. In a large suburban subdivision that is built out, lots may not be available but the increase in appraised value will still be divided between the land and the structure. I would think there is a formula but I don't know it.

[jm1fd]

My question is more about the mechanism for bringing up my property to the established market value. The land value is set based on the neighborhood, so it seems like the improvement value is the only real variable at play that then absorbes all the rest of the increase needed to bring the total value up to the sales price, right?

No. You're taking too simplistic an approach. All the lots in the 'hood aren't equally desirable, therefore they aren't equally valued.

If your sale (and others) indicate higher prices in the 'hood, then HCAD will adjust everybody's upward proportionally.

Or, on the other hand, if your lot is demonstrably more desirable then they can raise your value without consideration to the rest of the 'hood.

[mumbles]

I want to be taxed on my income, not on what I own. It currently takes 8% of my income to pay my property taxes. Compared to most state income taxes that is very high.

Land value going up is a product of land value going up. Property taxes follow. The reason we keep property taxes is because we don't have or want a state income tax.

[jm1fd]

I want to be taxed on my income, not on what I own. It currently takes 8% of my income to pay my property taxes. Compared to most state income taxes that is very high.

Move to a different state.

I happen to like the Texas tax system....it gives me the ability to control how much I'm taxed without having to limit my earnings. Make big bucks, live in a modest home, and effectively what you've got is a very low income tax rate.

[jscarbor]

Move to a different state.

I happen to like the Texas tax system....it gives me the ability to control how much I'm taxed without having to limit my earnings. Make big bucks, live in a modest home, and effectively what you've got is a very low income tax rate.

Then after you make the big bucks move to another state with Income Tax and Low real estate tax and have the best of both worlds?

[jm1fd]

Then after you make the big bucks move to another state with Income Tax and Low real estate tax and have the best of both worlds?

Potentially, sure. Although If you're saying retirement....well...you get a pretty healthy tax break with an over 65 exemption here in Texas.

[Pumapayam]

Don't forget if you are a senior, you are able to freeze the value from going any higher in order to keep you monthly expendetures in check.

[jscarbor]

Potentially, sure. Although If you're saying retirement....well...you get a pretty healthy tax break with an over 65 exemption here in Texas.

Then I'll move back at 65