Inequality of Appraisal: All you Need to Know to Maximize your Protest Reduction

April 17, 2021

Inequality as Your Protest Grounds

Homeowners face an uphill fight at the Appraisal Review Board this year.  The Appraisal District uses prior year home sales to establish assessments for the current year. Last year’s record setting increases in sale prices mean that this year homeowners cannot afford to rely solely on comparable sales for their protest.

Comparable assessments (“Inequality of Appraisal” or “Unequal Appraisal”) are more important this year than they’ve been in any of the twenty two years Property Tax Protest has represented owners.The district establishes values as of January 1 so protesters will need to use all the tools available to them.

Homeowners can expect better results if they include Unequal Appraisal (comparable assessments) as one basis for their protest rather than citing only Value Over Market (comparable sales).  But most protests overlook Inequality.

When successful Inequality always results in an assessment below market because it’s applied after market value is determined by the ARB.  But it’s complex and requires good supporting data.

What is the Inequality argument?

Greatly oversimplified, Inequality is the argument that your property is appraised unequally to your neighbors. Suppose that a representative sample of properties similarly situated to or of the same general kind or character as yours is appraised at 90%, 92% and 98% of their true market values.  You are entitled to an 8% discount below the market value ordered by the ARB.

Section 41.43 (b):   “A protest on the ground of unequal appraisal of property shall be determined in favor of the protesting party unless the appraisal district establishes that:

(1)  the appraisal ratio of the property is equal to or less than the median level of appraisal of a reasonable and representative sample of other properties in the appraisal district;

(2)  the appraisal ratio of the property is equal to or less than the median level of appraisal of a sample of properties in the appraisal district consisting of a reasonable number of other properties similarly situated to, or of the same general kind or character as, the property subject to the protest; or

(3)  the appraised value of the property is equal to or less than the median appraised value of a reasonable number of comparable properties appropriately adjusted.

(c)  For purposes of this section, evidence includes the data, schedules, formulas, or other information used to establish the matter at issue.”  (Emphases added)

Two of the three tests rely on appraisal ratios and one on value appropriately adjusted.

Why Property Tax Protest

You must demonstrate that the sample properties are appraised below their market values.  It’s the opposite of what you demonstrate to reduce your own property’s proposed market value.

The Texas State Comptroller instructs the ARB to focus on three key pieces of evidence:

1. Is the number of properties selected for the sample reasonable?

2. Is each of the properties comparable to the subject property?

3. Was the value of each property appropriately adjusted by reference to the subject property?

These are complex arguments that are beyond the abilities of most owners and many consultants.  We’ve been doing it successfully for many years.  We can do it for you.

From the Code:  Section 41.43. (c)  “For purposes of this section, evidence includes the data, schedules, formulas, or other information used to establish the matter at issue.” You can’t just make the argument.  You need good data well presented.  It’s what we do.

Inequality is a statistical, not a market based, argument.  The property being protested may already be appraised at market.  The remedy is a percentage reduction in the property’s market value.  The possibility of a lawsuit places the district at a disadvantage because (1) the protesting party can usually obtain counsel on a contingent fee basis while the district cannot and (2) the losing party pays the winning party’s fees.  The threat to the district’s budget is an incentive to settle especially in the higher values.  A settlement costs the district nothing; the cost is passed on to other taxpayers who did not protest.

Conclusion

Successful inequality protests always result in an appraised value below market because the discount is applied to market value.  Thus, they support other inequality protests in the following year.

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