Posts By: William Ryan

Who Sets My Property Tax?

Tax Bills are Made up from Many Taxing Jurisdictions

Should I Blame the Central Appraisal District? 

When Texas property tax bills come out in October, your first response may be that they are too high. Property owners want to blame the Central Appraisal District (CAD), the entity that sets their property values. In this case, the CAD is innocent of the blame. While the CAD does set property values, they are not part of setting the tax rates, nor do they determine the ultimate tax bill. In fact, it is usually the Tax Assessor/Collector who issues the property tax bill. 

Who Determines the Property Tax Rates? 

Local jurisdictions such as independent school districts, colleges, hospitals, cities, and the county all need tax revenue to operate. Each year they submit their budgets for review and approval. Based on their budget, and the values of properties in their taxable areas, tax rates are determined so they can collect the amounts needed for their budgets. While the actual process can be more complicated, this can be illustrated quite simply using the following formula:

 If a jurisdiction needs $1,000,000 and your taxable value is $250,000,000, then your tax rate would be $1,000,000 ÷ $250,000,000 = 0.4%. 

Can I Do Anything About the Tax Rates? 

Truth-in-Taxation requires that notices are published regarding public hearings about proposed budgets and tax rates. It is at these meetings that taxpayers can voice their concerns and seek that the proposed budget be denied. In cases where the tax rate increase is excessive, the increase will be placed on the ballot for voters to approve or deny. By exercising your right to vote, you can have an impact on whether certain tax rate increases are approved or denied.   

I’ve Done Everything Right but the Taxes Still Went Up! 

Sometimes you do all that you can to be heard, but the result is that tax rates–and your value!–still increases. This will cause your property tax bill to increase. Once valuations and tax rates are set, the tax bill needs to be paid. Each year you are given an opportunity to protest the noticed value of your property. If you are not reviewing your valuation and protesting when appropriate, you are missing at least one way of keeping your property tax bill lower. 

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What is the CMI Certification?

Understanding the CMI-Property Tax Designation 

Institute for Professionals in Taxation 

The Institute for Professionals in Taxation (IPT) has been around since 1976 and is a not-for-profit education association serving more than 6,000 members. As noted by the Institute itself, it is the only professional organization that educates, certifies and establishes strict codes of conduct for property tax professionals who represent taxpayers.

The IPT organization continually educates on property tax matters through various programs and classes. The CMI designation means Certified Member of the Institute, and it has been attainable since 1979. This certification is difficult to obtain and is more than a mere credential; it is a demonstration of expertise in business property taxation.  

[H3] What the CMI Designation is NOT 

To be very clear about what the CMI-Property Tax designation is NOT, it is not an endorsement from the Institute for Professionals in Taxation for any individual or firm.  Just like a CPA designation, holding this certification does not mean that the individual or firm is endorsed by the state agency that issued the designation. It means the individual has been recognized for dedicating numerous hours of study to the field of property taxation. 

Requirements for CMI Designation Qualification 

In order to qualify for the CMI, an individual must:

  • Maintain membership in the IPT
  • Document many years of property tax experience
  • Complete several educational schools provided by IPT
  • Successfully complete both the comprehensive and oral examinations given by the IPT

After attaining the CMI professional designation, certified members must maintain continuing education hours with the IPT. This is comparable to other professional designations such as CPA, JD, etc.  

 Why it Matters 

Not all who attempt to attain CMI certification are successful. In fact, only about 1,000 property tax professionals nationwide have ever earned this coveted certification.

The process is arduous and long. The tests are difficult and taxing, and it takes a dedicated individual to complete the requirements. As of the time of this writing, there are only about 480 active CMI-Property Tax holders in the United States and Canada.   

Individuals with the CMI-Property Tax designation show a commitment to the property tax industry. It is not an endorsement from IPT, but it does indicate experience and knowledge on behalf of the individual.   

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National Representation vs. Local Experience

Why we are passionate about knowing your properties

Appeals in a Big Firm

Everyone has reasons for doing what they do, and I am no exception. I used to be a partner at a national firm with properties all over the country. I took pride in my work and in our team, and I loved helping clients reduce their property tax burdens. After many years and thousands of hearings, I was given the assignment to handle our firm’s protests in Louisville, Kentucky. I eagerly prepared to go and attend the hearings, but as busy as we were, I was only able to review the properties from CoStar and the internet. I found comparable property sales and put together my evidence, sure that my workup was bulletproof.

Shocking Reality Check

When I arrived at the hearing, I began to present my case with full confidence in my work product. The board respectfully listened, and then when I finished they began to ask me some tough questions. They asked me about the neighborhoods and areas of town, and which adjustments were made and why. They asked about the condition of the subject and the comparables. I did not know the answers. Finally, I was asked a life-changing question: had I ever seen or visited any of the properties in person?

Under oath, I had to admit that I had not seen them. Their response shook me: “No one who knows anything about this part of town and these properties would ever consider them comparable.” That was it–the nail in the coffin. I did not secure a single reduction for my client that day, but I did walk out of that hearing with a firm conviction that I would NEVER be in that situation again. I vowed that I would represent my clients as if I owned the properties myself. I would visit every property and I would do my best to visit every equity or sale comparable we would use. At the end of the day, no one in the hearing room would know more about the subject property and the comparables than I would. 

Starting Over

Upon seeing that I could not make that change in my national firm, I set out to create my own firm. I noticed that at national firms, agents are often overburdened and don’t have time to visit every property. The reason I founded Wayfincer is to be different from the busy national firms and to provide personalized expertise and representation. We are founded on the principles of integrity, accountability, and excellence. I have never forgotten the shame I felt in Louisville, Kentucky, and I never want to feel it again. When a client entrusts you with their appeal, agents should never take that responsibility lightly. They should do more than you can on your own because they are fully dedicated to representing properties in the appeal process.  

Giving the Best to Our Clients

This monumental change in my perspective has caused us to spend countless hours visiting properties all over the markets where we represent our clients. The results have been profound. We have spent time learning the markets, asking questions, and becoming experts in the properties, knowing we are doing everything in our power to truly represent our clients.

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Why do I Need a Property Tax Agent?

You Need Someone in Your Corner Who Will Fight For You.

A Tax Agent is… 

  1. Licensed by the State

A Texas property tax agent is an individual licensed in Texas to represent taxpayers in the valuation appeal process. There are education requirements and certification exams proving a base level of competency in Texas property tax law before someone can become licensed.  Once licensed, continuing education requirements ensure agents are staying up-to-date on Texas law and ethics. When evaluating an agent, first check to see that they are licensed and legally allowed to represent you.

  1. Your Advocate 

Tax agents are meant to be your advocate and represent your best interests.  They are an extension of you throughout the appeal process. Their goal is to reduce your property tax burden while preserving your relationship with the county. Your agent should communicate with you proactively and keep you in the loop. Unless you specifically state it, they should not be accepting valuations or settlements without your knowledge. 

  1. A Representative Who Works For You

Your tax agent should be working for you, not working around you.  They should not file appeals on your behalf without your permission. Occasionally, you may find an agent who is overly aggressive and ignores your instructions. They may even threaten to drop your appeal if you don’t do what they say. These agents are acting beyond their authority, and you should review your rights to hire a more respectful agent. If you encounter a rude agent, you should run in the other direction!  Agents like this run the risk of causing a rift between you and the county–and that could damage your future appeals. There are too many good agents out there; you don’t need to settle for poor representation.

 An Extension of you

Ultimately, a tax agent should be an extension of you, decreasing your stress and fighting for reductions. They should handle the entire appeal process and keep you in the loop, while minimizing the burden on you. Hiring the right property tax agent will bring results to you and your property that can make a meaningful impact to your bottom line.

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Why Did My Value Increase?

How Can the Central Appraisal District Keep Raising My Value?

This Feels Illegal 

You didn’t do any work on your property and yet the value still increased. The taxes are crushing you and you may have wondered, “How is this even legal?” It might seem unfair, unjust, and downright illegal to be taxed out of your property. Unfortunately, it may not be fair, but it is legal. It all has to do with how properties are valued on a large-scale using market factors. 

Property Value Changes 

Texas law does not limit the amount of an increase or decrease to your property value by the Central Appraisal District (CAD). The CAD is tasked with finding what they determine to be your market value. They achieve this purpose by gathering sales of similar properties in the market.  Additionally, they gather market surveys regarding rents, expenses, and cap rates. Once they have this information, they look to see if the market values are trending up or down. They use this information to determine what happens to your value. Most often, the values in real estate trend upwards. This is likely why your value has continued to increase, even if you have not done anything to further improve the property.

CAD’s Limited Knowledge

The values determined are based on generalized models for the market[1]. It is highly unlikely that your property is exactly in line with the model. You may have some deferred maintenance, or there may have been an issue with your property during the past year that has negatively impacted you. This information is what the CAD is missing when valuing your property. It is through your protest that you may provide the CAD with this additional information and seek a lower value. As you prove your property is not in line with the model, the value should be reflected to show it. 

Here is a real-life example: one multifamily property owner I encountered had their property assessed and valued per the CAD’s model. The value increased. What the CAD didn’t know was the property had suffered a fire and lost an entire building of 16 units! The CAD was completely unaware that the property did not follow their model, and it appears the tax agent was unaware as well, since they did not file a protest. Unfortunately, the taxpayer was burdened with excessive taxes because their value was not reduced. Had an appeal been filed and the value reduced, the owner would have been able to use the tax savings to rehab the building in a more expedited manner.   

Don’t let this happen to you. 

Schedule a call with Wayfinder Tax Relief today.

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[1] Texas Property Tax Code §23.01

Why Are My Property Taxes So High?

You Need a Texas Multifamily Property Tax Specialist.

Why Your Taxes Keep Getting Higher 

Property taxes are determined based on the value of your property and the tax rates set by local jurisdictions. Since Texas does not allow income tax, the property taxes are higher than in other states. With multiple inputs, there may be many reasons why your tax bill is high. We will address a few of them in this article.

How Property is Valued 

Each year the Central Appraisal Districts (CAD) review and assess the value of your property.  As you might expect, most often the value increases. If you have not been contesting your value, this would definitely impact why your taxes seem high compared to others. Even though the CAD attempts to value every property fairly and equitably with others, it is a very difficult job.  They value thousands to hundreds of thousands of properties and cannot know your property personally. They use information they have gathered about the market to value properties en masse.  Hiring a tax agent to properly review your valuation each year and contest the value when appropriate can help keep the market value reduced, and thereby reduce your property taxes.

Why Tax Rates Matter

Another component of the tax bill is your tax rate. Even if your valuation stayed the same from last year, the tax rates may have increased. This would increase your tax bill. In the fall, the local districts have meetings to discuss their budget needs and proposed tax rates. This is really the only time you can voice your opinion about the tax rate. If you are not attending these meetings and letting your district know you want to keep the rate low, they will likely move forward with their proposal. 

Evaluating Your Agent 

If you have an agent who has been appealing your valuation and you still feel like your valuations are too high, then download the Property Tax Agent Checklist and rate your agent.  You may find out that it isn’t you, but it is your agent that is not giving you the representation you deserve.  Evaluate their fee, if it is a bargain price, you are likely getting bargain service.  Consider finding a Texas multifamily property tax specialist to take your results to the next level. 

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How do I Calculate My Texas Property Taxes?

Calculating Your Property Taxes in 3 Simple Steps

Step 1: Find your property value. This can be found on your Notice of Value or on the central appraisal district website where your property is located. If you don’t know your property account/parcel number, you can often find it by searching by address or owner name.  

Step 2: Determine the tax rates that apply to your property. In many instances, the tax rates can be found where you find your property value. Be sure to locate all applicable tax rates, which may include the Independent School District (ISD), county, city, hospital, community colleges, etc. A good check is to review the previous year’s bill to ensure you have located all the taxing jurisdictions.    

Step 3: Multiply the property value by the total tax rate. Texas property taxes are calculated on 100% of the market value of the property.  If the total value is $10,000,000 and the total tax rate is 2.5%, then the tax bill would be $10,000,000 x .025 = $250,000.

That wasn’t so hard, was it? The tax system can seem intimidating at first, but a few good tips from an expert will give you a good handle on the terminology and formulas used in your valuation, driving you to ask the right questions and know when you can go it alone and when it’s time to reach out for assistance.

Why Does it Matter?

When you know how to calculate your own estimates, you no longer need to take your tax agent or the taxing jurisdictions at their word. You can verify that your tax bill is correct, and you can calculate the tax savings you are receiving. You will have more peace of mind knowing you are not dependent on someone else’s work.    

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Why Would You Pay a Higher Percentage?

The Cheapest Tax Agent Usually Costs the Most Money

Are You Getting What You Paid For?

Comparing Agents

Searching for the right Texas tax agent can be overwhelming.  There are so many options, and everyone seems to have something unique.  The most common criteria used to compare agents is the contingency fee they charge, and agents are typically paid based on the tax savings they achieve for their client.  The major benefit to contingency is that the agent carries the risk and the client always comes out ahead by pocketing the difference from the original taxes less the agent’s fee. 

Lower Fee or Better Results?

The property owner’s dilemma is whether to hire the agent with the lowest fee or the one with the best results.  If Agent A charges 30% and Agent B charges 20%, it is logical that the owner would see the net 80% as a better deal.  Unfortunately, experience shows that the cheapest agent usually is the most expensive.  

Low cost service usually indicates: 

  1. You are just another volume client
  2. Agents are typically overburdened and can’t provide you with specialized service
  3. Agents don’t have the time or the drive to visit your property and gain critical first-hand knowledge

On the other hand, agents who specialize may charge a higher contingency fee, but some of the benefits are they:

  1. Have time to know your properties individually
  2. Perform annual site-visits to help them see the property over time
  3. Perform deeper market research to help them achieve greater tax savings

Comparing Results

To illustrate the difference, let’s look at some real-life 2020 multifamily examples (with names redacted) in Midland, TX: 

 Agent A – 30% Agent B – 20%
Property#1 #2
Noticed Value$52,074,060 $62,175,000
Final Value$31,000,000 $62,175,000
Tax Savings$359,569  $0 
Net to Client$251,698  $0 

Agent B did not achieve any tax savings for their client.  The fact that their fee was lower did nothing to help their client lower their property taxes.  However, Agent A’s expertise and focus produced results that put money back into the client’s pocket.  Remember, if you aren’t paying your tax agent, then they aren’t saving you money.  The age-old adage rings true, you get what you pay for.  The cheapest agent usually costs you the most in lost tax savings.       

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10 Points You Should Use to Evaluate Your Agent Today

Has Your Agent Drifted?

Despite our best intentions, it is human nature to drift over time.  We may start a new fitness routine, but after a few weeks we slowly stop going to the gym.  Some of us may commit to eating healthier, but we quickly become bored with broccoli and slide back into bad eating habits (fried chicken).  Those who are conscious of this effect constantly check themselves to get back on track.  Property tax agents are no different.  When a tax agent wants your business, they will position themselves with all they can and will do for you.  At first, you are the apple of their eye and will be treated like a VIP.  Over time, drift begins to creep in, and you become just another number in their client pool.  If you are not careful-and diligently holding them accountable-it will likely begin to be reflected in your tax savings.  

Hold Your Agent Accountable

The Property Tax Agent Checklist is a free tool that allows you to rate your agent in 10 areas that impact you directly.  They are:

  1. Frequency of updates
  2. Ease of communication
  3. Communication when there are problems
  4. Expertise in property taxes
  5. Requests for information 
  6. Mentality for problem solving 
  7. Investment in your success
  8. Capacity to meet your needs
  9. Commitment to physical site visits
  10. Current on market research

The score your agent earns from your evaluation will help you know if you should keep your agent or seek better representation.  Choosing the right agent for you can mean a huge impact to your bottom line.  Choosing a tax agent once and then continuing to use them simply to keep the status quo is the perfect storm to let drift set in.  The phrase “set it and forget it” is for crockpots, not for tax agent representation.  It allows agents to become complacent, and your results suffer.  As Joyce Carol Oates said, “The great menace to the life of an industry is industrial self-complacency.”  

Trust, but Verify

Your agent should focus on your best interests, but drift can cause them to go astray.  Use the Property Tax Agent Checklist annually to confirm that your agent is giving you the best representation.  Where there are correctable shortcomings, bring them up and hold your agent accountable to make the necessary changes.  You deserve the best agent to help you and your company reduce your Texas multifamily property taxes each year.

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How Does The Property Tax System Work?

Property Tax Basics

Each year, multifamily properties receive a valuation notice and later, a property tax bill.  Property taxes are used to fund local schools, city and county governments, and other local projects.  Since Texas does not allow income tax, property taxes become extremely important for funding the local government.  

Every county has a Central Appraisal District and its responsibility is to determine the market value of each property in its respective county.  To accomplish this goal, they must use methods of mass appraisal and make many assumptions about properties as a group.   

The Central Appraisal District does not determine or tax your property.  They don’t even set the tax rates.  The local taxing units set the rates and collect the taxes.      

Inaccurate Valuations

As you can imagine, a process that makes assumptions for large groups of properties leaves a lot of room for mistakes.  For your Texas multifamily property, you should never assume that your property has been valued correctly.  The valuation should be reviewed within the 30-day deadline, giving you time to appeal it.  For established multifamily properties, they are most often valued on an income approach.  The income approach looks at the net income and a return rate in deciding what a potential investor would pay for the property.  Using market rents and market expenses produces a market valuation, known as Fee Simple.  Using contracted rents and actual expenses produces a valuation known as Leased Fee.  The goal in Texas is to determine the Fee Simple valuation of your property.   

Controlling Your Property Taxes

When you consider all the annual expenses at a multifamily property, property taxes are the largest, typically making up 33% of total expenses per unit in garden apartments and 39% of total expenses per unit in mid & high-rise apartments according to the National Apartment Association 2020 Survey of Operating Income and Expenses.  

Cost cutting measures can easily be swallowed up by increasing property taxes.  Fortunately, you do have options to combat property tax increases.  If you feel your property is overvalued for tax purposes, you can file a protest with the Appraisal Review Board in the county where your property is located.  During the process, you will need to provide evidence showing why your valuation is excessive.  Remember: this is an argument about the valuation being too high, not the property taxes.  Stating that your taxes are too high will not secure a reduction to the noticed value.  If the protest is determined in your favor and your valuation is reduced, this will have a direct impact on your property tax expense.  Paying close attention to property taxes can have a significant impact to your bottom line.

Don’t Ignore Your Valuation

It is so easy to get caught up in other responsibilities and forget the importance of the one little piece of paper stating your property value and appeal deadline.  Yet, that paper can potentially be one of the most significant ways to reduce your expenses and increase your profitability.  In the rush of everything else, don’t forget to look at your property taxes.  If you are overwhelmed by all you have to do, property tax appeals can be taken off your plate by giving it to a multifamily property tax specialist.  Done right, tax agents should expand your capacity while eliminating your stress. 

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