Are You Ready for Higher Property Assessment Notices?

News of rising property values was abundant in the latter half of 2021 around the country and across Texas. For some industries, property types and in some markets, prices soared well above pre-pandemic levels. Property tax assessors have surely taken notice.

Although not all real estate sectors faired so well, tax assessors across the country are seeing headlines like, “Commercial Real-Estate Sales and Values Surge to Records”[1] in The Wall Street Journal, and “Not Just Residential: Commercial Real Estate Is Booming, Too”[2]. The WSJ article began, “Investors purchased a record amount of commercial real estate in the third quarter, defying warnings that the Covid-19 pandemic would erode these property values and starve the industry of cash.”

It is not only real estate that is selling at all-time highs. Many inputs from basic supplies to equipment are selling at elevated prices for various reasons, including temporary supply chain issues. A recent webinar by The Federal Reserve Bank of Dallas and Texas Real Estate Research Center, advertised: “The COVID-19 pandemic has profoundly impacted nearly all industries, including real estate, where it has accelerated demand for housing and warehouse space. While home sales, apartment demand and absorption of industrial space remain highly elevated—and prices and rents are at all-time highs—activity in the office market remains in flux.”[3]

A recent report on the Houston retail market stated that, “local retail vacancy tightened to 5.9 percent at the end of 2021, hitting levels not seen since before the pandemic, according to NAI Partners.” It additionally reported that, “positive trends in leasing and absorption have driven retail asking triple-net rent to $19.13.”[4] San Antonio’s deputy chief financial officer, Troy Elliot, was recently quoted as saying, “As we start looking at the economy opening up and hotels having higher occupancy, then we’re thinking that commercial [property] value is going to increase as well.”[5]

So, we expect to see significant increases this year in initial assessed values. It will be up to each individual property owner, or their property tax agent, to determine if the increases are equitable or reasonable based on the individual characteristics of their properties, and to appeal accordingly.

At Tax Advisors Group (TAG), we look closely at market dynamics by area and property type from several sources to gauge fair market value, and we look at our clients’ individual property characteristics, such as deferred maintenance, age, condition, and specific location issues, such as blighted neighboring properties, ingress and egress, etc. Additionally, even if a property is assessed in line with market value, we check to see if our client’s property is assessed equally and uniformly with comparable properties. In Texas, in addition to market-based appeals, we have the right to protest solely on uniformity (i.e., “uniform and equal appraisal,” irrespective of market value). When applicable, we appeal for reductions below market value if assessment comps support such a case.

As for M&E and other business personal property, though some things are hard to get due to temporary supply constraints, a careful examination of used equipment sales across 2021 does not support higher percent-good factors compared to prior years.  In fact, sales prices are depressed due to market conditions in some industries and regions. So, if assessors attempt to ratchet up indexing or depreciation factors we are prepared to push back.

We continue to invest in premium resources to represent our clients with strength and professionalism; we hire and retain the best people and equip them with the market data, training, tools, and technology to win. As property tax is an operating expense, we appreciate how important this is to each client’s bottom line, and we work to ensure our clients pay no more than their fair share. If you need help in this way, please contact us!

About Tax Advisors Group (TAG)

Tax Advisors Group, an award-winning property tax consulting firm, is the leader in preserving capital through innovative property tax services for businesses nationwide. Headquartered in Dallas, Texas, TAG provides all services associated with property tax, including real estate and business personal property for companies in every industry other than residential. Forbes recognizes TAG as one of America’s Best Tax Firms and TAG maintains a client retention rate of over 95%, both of which are testaments to TAG’s exceptional outcomes and elevated level of service. With a model rooted in the proprietary TAG ItTM methodology, TAG employs a unique and innovative approach to reduce the tax burdens of their 700 clients. Across the US, TAG represents over 15,000 accounts with a cumulative value of over $18 billion. For more information about TAG see www.taxadvisorsgroup.com or email info@taxadvisorsgroup.com.

About the Author

Lynn Krebs, Phd, CMI, is CEO of TAG. An industry leader for over 20 years, Lynn oversees overall business strategy, client relationships and business expansion. Lynn received his undergraduate degree and Masters in Land Economics and Real Estate from Texas A&M University and earned his Doctor of Philosophy degree from Georgia State University. Lynn’s early career included a nearly decade-long stint as Director of Education and Certification Programs at the Institute of Professionals in Taxation (IPT).  Lynn participates in several professional associations and is a frequent speaker at regional and national state and local tax conferences. IPT is especially important to Lynn; he serves as Chair of the Advanced Property Tax Education committee, Chair of the DFW Local Luncheon committee, and is a member of the CMI Property Tax professional designation committee. He was the 2015 President of the Aggie Real Estate Network (AREN) and served on the Board from 2011 through 2016. He is a Certified Member of IPT (CMI) and a licensed Texas Senior Property Tax Consultant.

[1] Grant P. (2021, October 26). ‘Commercial Real-Estate Sales and Values Surge to Records.’ The Wall Street Journal. https://www.wsj.com/articles/commercial-real-estate-sales-and-values-surge-to-records-11635249600

[2] Quillen A. (2021, November 16). ‘Not Just Residential: Commercial Real Estate Is Booming, Too.’ NBCDFW.com. https://www.nbcdfw.com/news/local/not-just-residential-commercial-real-estate-is-booming-too/2817043/

[3] Source: Dallasfed.org. (2022, February 24) ‘Emerging Trends in Real Estate Markets Post-COVID.’ Federal Reserve Bank of Dallas. https://www.dallasfed.org/research/events/2022/22realestate

[4] Source: NAI Partners (2022, January 25). ‘Houston retail market ends 2021 with positive outlook.’ News Talk Texas. https://www.recenter.tamu.edu/news/newstalk-texas/?Item=27029

[5] Dimmick I. (2022, February 16). ‘Council mulls possible property tax rate decrease, homestead exemption increase.’ San Antonio Report. https://sanantonioreport.org/san-antonio-council-property-tax-rate-decrease-homestead-exemption/

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