On the move: Understanding property taxes in Houston - and right to protest
Property taxes in the Houston area can seem relatively expensive, especially for people who are relocating here. So, understanding property taxes, as well as the ability to protest those taxes in hopes of a reduction, is an important aspect to homeownership.
In the Houston area, homeowners pay property taxes based on their property’s appraised value, which is established by the appraisal district in which the home is located. By state law, properties are taxable based on their market value as of January 1 of each year.
For homes located in Harris County, the Harris County Appraisal District (HCAD) determines property values.
Mike Mahlstedt, an agent with Heritage Texas Properties, said that he talks to his clients about property taxes at the beginning of the home buying process, since taxes can have a significant impact on the overall cost of homeownership.
“Before we even get a property under contract, I am overly vocal with my clients about figuring out what their total cost will be, and property taxes are a huge part of that,” Mahlstedt said. “I tell my clients when they are considering a property, that they should assume that the property taxes will be based on the sales price value of the home.
“If they can get that value reduced, then that’s great, but I want them to go into the transaction assuming that they will be paying on the full sales price value.”
In Texas, the county appraisal districts cannot increase the appraised value of a homestead by more than 10 percent in any given tax year. For that reason, Mahlstedt said that it is important for homeowners to ensure that they have a homestead exemption on their property.
The homestead exemption reduces the amount of property taxes that a homeowner is required to pay each year, because the exemption removes part of the appraised value of the property from taxation.
In Harris County, a home could be eligible for a 20 percent homestead exemption.
Homeowners also have the right to protest their property taxes on an annual basis, if they believe that the appraised value is too high.
Mahlstedt said that he encourages his client to protest their property taxes if the value goes up, but there are also situations where protesting isn’t likely to reduce the appraised value.
“For example, if someone just purchased a $2 million home, and the appraised value was $1.2 million, I would advise against protesting, because there won’t be any comps to support it, and the county does have the right to increase the value,” Mahlstedt said. “I also remind my clients to check their property values online, and I provide guidance as to whether they should protest the value.”
Another option for homeowners is to engage the services of a company that can protest their property taxes for them.
Patrick O’Connor is owner and president of O’Connor, a real estate service company that specializes in checking property tax values for homeowners, and appealing those values on an annual basis, if there is a basis for doing so.
“While some homeowners will appeal periodically, very few will appeal annually,” O’Connor said. “So, we are sort of an assurance process for the homeowner. We make sure that their value doesn’t become larger than it should be, and that they are not paying more than their fair share.
“We strongly believe that homeowners can keep their property values at 10 to 30 percent below market value, simply by appealing annually.”
Although homeowners can appeal their property taxes on their own, O’Connor said that the process can be quite time consuming, and requires the proper research and gathering of pertinent information.
In terms of the cost, O’Connor said that his company works with homeowners on either a flat-fee, or on a contingency basis. He said that most homeowners opt for the contingency basis, which means that his company only gets paid if O’Connor is successful in reducing the homeowner’s property value.
For homeowners who are new to Texas, O’Connor said that the idea of an annual revaluation process can take some getting used to.
“Most states only revalue periodically, and Texas is unusual in that a homeowner can appeal their property taxes annually. So, it’s also an added bit of homeownership activity that is not typical in other areas,” O’Connor said.
He also advises homeowners to check the accuracy of the information that the appraisal district has listed for their property.
“Homeowners can look up their property and see what the value is, but they can also see what the appraisal district shows as the condition of the property, the grade of construction, and the size of the house,” he said.
Michelle Sandlin is an award-winning writer, journalist and global mobility industry expert. Her work is frequently featured in Worldwide ERC’s Mobility magazine, and in various business and industry related publications and corporate blogs. Follow her on Facebook: www.facebook.com/TheMichelleSandlin and on Twitter: @MichelleSandlin. Also visit “On the Move” at blog.chron.com/onthemove.