How Texas Appraisal Districts Work

When Tarrant County tax consultant Chandler Crouch knocked $100,000 off his client’s $900,000 appraisal, it was a win. But that victory didn’t taste nearly as sweet as the one that came shortly after, when Crouch, also an agent, turned around and sold the home for a little under $2.5 million, to his client’s joy and the tax appraiser’s dismay.

An agent of the county’s appraisal district filed a complaint, and Crouch clarified that the property he sold included three separate accounts, in part justifying the difference between sale price and appraisal value. But the saga highlighted the key lack of transparency that makes appraisal akin to a magic act in Texas.

In the Lone Star State, where commercial and residential property sale prices are not required to be disclosed, appraisers have to do their work with limited data. They scrub every source they can — multiple listing services, CoStar, LoopNet.

But crusaders like Crouch have built businesses around what he calls a “completely screwed up” system. In his first year protesting appraisals, Crouch filed 1,700 protests with the Tarrant County Central Appraisal District. Last year, he hit 28,000, which led the appraisal district to say Crouch was making a “mockery of the current tax system.” He intends to file as many as 40,000 protests this year.

In part, the very ambiguity that so bothers property owners when their bill comes in high is the same uncertainty that gives them room to protest appraisals down, even those that are more or less the same as their sale price. Using custom-built software to handle the massive amount of paperwork tens of thousands of protests requires, Crouch whittles down cases to find ones he says require real work.

“First, we send a lowball offer on all of our properties. If they’re willing to agree to the lowest value that our evidence will justify, then we’re done,” Crouch said.

But for the vast majority of cases, it’s much simpler.

“They don’t want us in there doing 30,000 hearings,” Crouch said, “and they know that we have the data to back it up, because one time they called my bluff, and I sent in 191,000 pages of evidence.”

The ambiguity in appraisals can lead to incorrectly high assessments, but more often than not, it creates room for lower values than a building’s actual sale price.

“In property tax, we’re not trying to come up with an accurate value,” Crouch said. “An accurate value is a range, and all we have to do is determine if there’s data to justify a value within that range below what the appraisal district is proposing.”

From nothing, a number

Appraisers try their best to be polite.

“The good basis of an appraisal is comps,” said Brent South, chief appraiser at the Hunt County Appraisal District. His district receives notice every time a property trades hands, and it sends letters to the buyer and seller requesting more details on the sale.

“As you can imagine, we don’t get a very high response on that,” South said.

With little to go on, appraisers have to get creative to generate their valuations. Often, that means drawing on well-known real estate data providers, even though many in the industry don’t know appraisers are lurking.

“For what I do, generally the MLS is sufficient,” said Steve Kahan, an appraiser based in Houston who works with mortgage lenders. “That’s where we get the majority of our data from.”

In 2019, the Austin Board of Realtors claimed that Travis County Appraisal District had inappropriately obtained home sale data from CoreLogic. The appraisal district later confirmed that it had bought the data from CoreLogic but argued there was nothing wrong with the move. CoreLogic soon terminated its contract with the appraisal district, but the damage had been done.

“Our options are don’t list the house for sale or list the house for sale and disclose the price,” Crouch said.

For many of Texas’ smaller, rural counties, however, hard data remains out of reach. “Especially for some of our smaller rural districts, the cost is just too great,” South said.

Commercial properties, which often have more complex financing arrangements and are not subject to the same listing rules, have more wiggle room. But amid the influx of national investor interest in Texas, appraisers may prey on those who don’t know the state’s system to get more data for comps.

“That’s where a lot of their data is going to come from: shooting really high with values,” said Tony Trahan, a tax consultant with KE Andrews. “Then, especially out-of-town agents or owners are like, ‘No, it’s not. It’s 80 percent of that, here’s my documentation.’”

Appraisal districts still face some measure of accountability. Every year, the state Comptroller studies how well appraisers across the state performed. Each county’s appraisal district — that’s right, all 254 counties get their own appraisal district — must be reviewed at least every other year, according to state law.

The report compares the sale prices that are disclosed, whether through news releases, PR-hungry brokers or some other means, to the estimated values of similar properties from each district. That ratio can give some insight into how closely estimated values hew to real ones.

Dominoes

This year’s property valuations have arrived, and it doesn’t look pretty for some property owners — particularly multifamily landlords.

In Dallas County, the latest valuations were particularly harsh for owners of older buildings, which in past years have seen their appraisals increase at lower rates than newer stock. But this year, the average multifamily building constructed in 1980 or earlier saw its valuation rise by 36 percent, according to data from tax consultancy KE Andrews. Those built in 2011 or later increased 27 percent — still a wicked hike, but not quite the burn felt by owners of older multifamily buildings.

Valuation increases were a bit less severe for office buildings. Appraised values increased by 18 percent for the “Class A+” office buildings, and around 17 percent for Class A and B workplaces. Class C buildings, the ones most likely to be struggling with low occupancy and costly renovations, jumped 9.5 percent.

In fast-growing Collin County, which includes McKinney and Allen and parts of Frisco and Plano, valuations for multifamily buildings of every vintage increased by more than 34 percent. The hardest-hit subset, those built between 2000 and 2010, saw values increase 41 percent, KE Andrews data shows.

Three things are certain — life, death and taxes — but in Texas, there’s a step after taxes: tax protests. Crouch is an extreme example, but there are tax consultants across the state specializing in bringing down appraisals.

“We are a country that is founded on a hatred for taxes,” said Lauren Cadilac, a Dallas attorney and frequent thorn in the side of appraisal districts. “That is a tradition in this country — we riot when we have to pay taxes.”

Still, the slow, bureaucratic process of filing an appraisal appeal is a far cry from tossing tea in Boston Harbor. But people who have been “vigilantes” about protesting their valuations are doing alright this year, Cadillac said — it’s those who have put off protests for whatever reason that are “really, really, really feeling it.”

Appeals tend to work like dominoes: When one building owner successfully argues down his appraised value, owners of similar properties can get theirs taken down, too. The state constitution guarantees that properties must be taxed on an “equal and uniform” basis, and while the exact meaning of that phrase has been litigated for decades, it has effectively allowed building owners to argue down their assessments based on values currently on the tax roll.

“That’s the saving grace of why you see Class A industrial buildings still valued at $70 a foot,” Trahan of KE Andrews said, “while you see a few sale prices that come out on industrial buildings that sold for $130, $120 a foot.”

“It’s very challenging,” South, from the Hunt appraisal district, said. “I think that a lot of property owners get frustrated because we just don’t have the data we need to be as accurate as we want to be”