Appraisal IQ Blogs

A Property Tax Assessment is not the same as a Property Appraisal

Tue, 10 Oct 2023 20:25:59 GMT

All About Your Property Tax Assessment

Your tax bill arrives and you have a heart attack. If your property is worth the property tax assessment the taxing district thinks it is worth, it’s time to SELL and retire to Aruba! If only

Tax Assessment and Market Value Difference

Property tax assessments fall into three categories:

Low
Plausible (somewhat close)
High

If you’re in the first two categories, pay your taxes, file the paperwork and go fishing. If you’re in the last one (high), gear up to protest your property taxes, armed with real data that can help your cause. You should read, How Do I Appeal My Property Tax Assessment

How Do Taxing Districts Determine Value?

If tax values aren’t the same as market value, how do taxing districts such as the Travis County Appraisal District (TCAD) come up with their numbers?

Tax districts use massive software programs with sophisticated algorithms to assess property values in an area. Although these values are supposed to assess property at actual market value, they frequently don’t.

The reasons for this are many, and include:

These programs use data available in public and governmental databases. This data may be accurate (number of bedrooms, size of the lot), or it may be wrong (3 bedrooms when a home has four because the game room was converted when the addition was added and the addition isn’t in the property records yet).
The software does not know about the actual condition of each property. Condition matters. In Travis and Williamson Counties, the programs use something called percent good, which is a marker of how nice your home is. Low percent good means the property isn’t in good condition, average condition (from my personal observation) seems to be in the 70s. High percent good ratings trigger the assessing program to give a higher value to your home as compared to a home that is otherwise completely comparable in size, location and condition that has a lower percent good rating. Although the taxing district is supposed to come out and verify these ratings in each neighborhood, that doesn’t always happen.
The application is frequently unaware of the market boundaries that define where values change, and sometimes they change by quite a lot. You may already recognize these boundaries, such as a major road where the subdivisions on either side map to a different elementary school or where one is much closer to noisy or yucky stuff (a stone quarry).

All of those things (or any of those things) will make your property tax assessment differ from what it should be.

How Do Appraisers Determine Value?

Appraisers determine fair market value differently than taxing districts. Some key differences:

Appraisers do not use automated valuation programs when appraising individual properties.
The appraiser will visit your property, measure it, and assess the actual condition of the property. Read Appraisal Steps: Determining the Market Value of Property.
After he or she has inspected your property (the appraisal inspection), he or she will carefully analyze your property vs. the most comparable (similar) properties that recently sold in your area, which is the Sales Comparison Approach, one of the three approaches to value used by professional appraisers.
When the analysis is complete, the appraiser will reconcile all of the information and arrive at an opinion of value which will be the appraiser’s opinion of the Fair Market Value of your property.
A good appraiser will understand the boundaries of market areas and other factors that influence the value of your own property and your report will reflect this expertise.

Protesting Your Property Tax Assessment: a Personal Tale

The actual market value of this home was less than the property tax assessment on it. The taxing district agreed at the formal hearing and lowered the tax value.

I pointed out a few things: the homes were much newer (built after 1994, vs built before 1982), the homes were on bigger lots (on average), the homes mapped to a better school. Of these three points, the hearing panel was interested in the first two (age and lot size) because these are more concrete data points.

They weren’t particularly interested in my third point (the school). I also pointed out that my own area had an ample number of homes (thousands) that were arguably comparable in age and lot size to my own, with lower assessments, and questioned why they would skip those comps and use homes that were several miles away. I also quibbled with the percent good number assigned to my home (90%) when almost all of the others on my own street were marked in the 70s, including ones that I personally knew had expensive new updates that made them far superior in quality to my vintage 1982, seriously ugly house.

The formal hearing panel agreed with my assertions and lowered my tax assessment by about $25,000, which saved me about $700 that year alone.

Another year, I used a similar argument and saved even more. The next year, though, my property tax assessment was close to market value, so I let it slide.

Protesting Your Tax Assessment: Your Own Story

Have you received your tax bill in years past, heaved a big sigh and paid it? Why?

If you’re one of the folks whose property value is higher than the likely fair market value, fght it. What have you got to lose? What have you got to gain?

Facing the formal hearing panel the first time can be intimidating, but don’t let it get to you. Arm your self with concrete data, and if you’re really uncomfortable arguing your case, hire a tax protest company to argue for you.

One excellent piece of evidence you can (and should) use to protest your taxes is a professional real estate appraisal, from a certified residential appraiser.

Hire us to perform your appraisal, and either you will discover that the property tax assessment is low, close, or high. A typical appraisal will cost $350 to $425, depending on the size and complexity of the property, and this is money well spent. If we were to receive another tax bill for our own home that felt out of bounds, we would hire another appraisal firm to appraise our own property, to provide the evidence we needed to protest. (We can’t appraise our own property because that would be a conflict of interest.)

To get started, read our more specific tax protest, How do I Appeal my Property Tax Assessment?

Another good read is, Appraisal Steps: Determining the Market Value of Property.

Austin Condo Mortgage: Not Your Typical Home Loan

Tue, 10 Oct 2023 19:55:03 GMT

Condo Loans and Condo Financing – Tougher to Get?

Yes.

A condo loan requires both the buyer and the condo association to qualify. Even a highly qualified buyer may not be able to purchase a condo, if the condo development is not as financially stable as a lender requires.

Some Austin Condos Won’t Qualify

Austin has a lot of condos, including older developments and newer ones dotting the downtown skyline. In August of 2010, the Austin Business Journal reported on the failure of the Pecan Place Condominiums near 183 and Texas 45 in Northwest Austin. Half of the 29 townhouse condos had sold but the remaining ones were in various states of completion. Other developments have also made the news, in different stages of failure or distress.

In situations like those, even if a borrower had really really wanted to buy one of the condos, condo fnancing would have been impossible to obtain – the financial health of the developments was not ok.

Other condo developments, of course, are doing just fine. Make sure you know which is which when you go shopping for a condo so your condo mortgage will be less likely to stall the deal. FHA loans for condos are also different from regular home loans, or non-FHA condo mortgages.

Work with an Experienced Lender for Your Condo Mortgage

How many years have you been in this business?
How many condos have you sold? (Or, how many condo loans have you done?)
Are you familiar with this particular development? What can you tell me that you think I need to know?
Can you describe the condo financing and condo buying process and how it is different than the home buying process?
How will you make sure we have good communication about my purchase?
How many units are rentals and how many are owner-occupied? Does that make a difference in whether or not I can get a condo loan?
What are the fees in addition to my condo mortgage payments that I will have to pay (upfront fees, on-going or monthly fees)?
If you don’t understand any of the answers, ask them to explain their answers and keep asking questions until you’re sure you understand!

Cash Buyer? Don’t Skip the Appraisal!

Tue, 10 Oct 2023 19:36:31 GMT

Buying a Home with Cash?

1607 homes listed in the Austin-area MLS were purchased by cash buyers in the last 90 days.

One question we hear is, “If I have the cash, and I don’t need a lender to give me a loan, why would I spend the money for an appraisal?”.

The short answer is: to get an independent opinion of the value of the home. Because you’re making a BIG decision and extra information to inform that decision is a good thing. Because after the inspection (by a licensed home inspector, to determine the condition of the property), you might want to re-negotiate the contract terms (before your option period runs out). Having the results of the inspection AND the results of an appraisal will give you information that can help you weigh your options if you decide to re-negotiate.

And, in particular, if you’re a cash buyer because the house needs too much work to qualify for a loan, then an independent opinion of the value of the property can help you decide if you really want to do the deal. You can order an appraisal for a cash purchase that provides both an AS-IS and AS-REPAIRED value.

What does it take to order an appraisal? Just call (512) 541-2107 . We can usually schedule the inspection within two days, and have the report back two days later.

Certified Appraiser vs. Licensed Appraiser: The Difference in TX?

Tue, 10 Oct 2023 19:25:58 GMT

What is the DifFerence Between a Certified Appraiser and a Licensed Appraiser in Texas?

Short answer: the amount of real estate appraiser education and training, as defined by the Texas Appraiser Licensing and Certification Board (TALCB).

Also: the types of properties the appraiser can appraise.

The table linked in from TALCB, above, provides the best summary of the differences in Texas between the licensing levels for a Certified Residential and a Licensed Appraiser (as well as for a General Appraiser, the highest-level of license that also permits the licensee to appraise commercial property.)

Certified Appraiser Licensing Requires More Experience and Education

To obtain the license level of a Certified Appraiser in Texas, a candidate needs more education (both undergraduate education and appraiser-specific education) and more documented hours of appraisal experience, over a longer period of time.

Each licensing level requires the applicant to pass an exam (the National Uniform State Appraiser Examination) specific to that level of licensing. The exams are developed by the Appraiser Qualifications Board (AQB).

The Bottom Line on Certified vs. Licensed

If you want to join the profession: study the differences and talk to appraisers at different license levels to decide which level to pursue (hint: Certified).

One More Thing: How Much Property the Certified Appraiser Can Appraise

“May appraise 1-4 unit residential properties without regard to transaction value or complexity of the appraisal for federally related transactions (FRT) and non-federally related transactions (Non-FRT).

May associate with a Certified General Appraiser, who must sign the report, to appraise nonresidential properties.”

Closing on a Home: What to Expect in Austin

Tue, 10 Oct 2023 19:13:26 GMT

What to Expect When Closing On A HomE

Closing on a house is an exciting moment for every future homeowner.

At the same time, it can be an overwhelming and confusing experience, particularly for those who have never purchased a home before. Therefore, if you are planning to purchase a home, it is in your best interest to learn as much about the closing process before you reach this big step.

Who to Expect At Your Home Closing

Before heading into a closing situation, it is helpful to know who will be in attendance.

The number of people who will be present at your closing will vary depending upon the state in which you are purchasing your home as well as the circumstances surrounding the purchase.

At a minimum, you will meet with the real estate agent who sold you the home, but you might also bring a settlement attorney to represent your side of the purchase. In some cases, mortgage brokers participate in the closing, but don’t be surprised if someone representing the financial institution from which you are borrowing is not present. Individuals representing the seller, such as the seller’s agent and an attorney representing the seller, may also be present at the closing. If you’re buying a home in Austin, expect to have all of the above present.

Plan Enough Time for Your Closing

While there is no guarantee regarding how long it will take for the closing to take place, you should plan on it taking about an hour.

This is because there is a significant amount of paperwork that needs to be reviewed and signed during the closing. If any issues arise during the closing process, it could easily take much longer to complete

Bring the Right Paperwork

Although your real estate agent will bring most of the required paperwork to the closing, there are a few pieces of information that you will need to bring with you.

The two most important things you need to bring to your closing are a cashiers check and a home owner’s insurance policy. The cashier’s check will be used to pay the closing costs, while the home owner’s insurance policy will provide the proof you need to show that you have obtained the proper coverage for the house you are purchasing.

Take Possession of the Home

Although the seller is advised to keep his or her home owner’s insurance in place until the sale is oficially recorded in city hall, you will take immediate possession of the home after you have completed the paperwork.

As such, you will receive the keys to the home before you leave the closing. You will also receive any necessary paperwork regarding the equipment that you purchased with the home, such as the owner’s manuals for your washing machine, garage door opener, refrigerator and any other items that come with the house.

Condo Plumbing: Some Things You Need to Know

Tue, 10 Oct 2023 18:58:41 GMT

Condo Plumbing can be a bit tricky

If you own a home (or have in the past), you probably know a bit about plumbing.

When you need to work on it, you can turn off the water. Easy Peasy!

This is so not the case in many condos!

Shared Waters Systems for Condos

Condos are often on a shared water system. By shared, we don’t mean just on city water, we mean shared, as in: the pipes run from one unit to the next, or they’re all fed off of one (or more) main valves. Shutting off the service to one unit may mean shutting off the service to all of them in the complex, or to a bunch of them that are in the same building (if the development has multiple buildings).

If you want to do some plumbing work on your own unit, you need to schedule a maintenance period with the HOA (Home Owners Association). The HOA is often managed by an HOA Management Company.

This might take a few days, or it could take a few weeks .

Working on Condo Plumbing

You may or may not get to pick your shut-down time to work on the plumbing in your unit. The HOA might tell you when you can do it, and then you get to work within that time frame.

You must find a reliable plumber that will show up on time, and make sure the job is completed before he leaves, so that the water to all of the affected units can be turned back on. Some HOAs will want the licensing information for the plumber before approving the maintenance, so your friend Joe-the-handyman who will work for beer and $20 might not pass muster.

And here is the painful kicker to all of this: shutting off the water isn’t as simple as just shutting off the water like it is for a single- family home. The water may take a while to drain from the system. It could take 20 minutes, it could take an hour or more. More units = longer time to drain.

And then, let’s say the work gets done, and the plumber wants to tests the work for leaks. It also takes a while to turn the water back on. Sometimes the plumber won’t have permission to turn the valve back on – maybe the maintenance guy has to do that, and you might have to hunt him down, first. And if the new connections leak, it’ll take the shared plumbing system a while to drain again before more work can be done.

A Real Life Condo Plumbing Story

You may be asking: where do they GET this stuff they write about?

Real life, of course.

Here is a real life shared condo plumbing tale of woe.

Woman buys condo.
Hall bathroom is UGLY.
Woman orders new countertop for hall bathroom.
Counter is delivered and can’t be installed because the water shut-off valves under the sink don’t turn all the way off, which means the faucet on the old counter can’t be removed.
Woman learns that replacing the shut-off values requires shutting off the water main for 8 units.
HOA gives permission after checking plumber’s license, notifies residents of 4-hours for a water-off maintenance window.
Maintenance man shuts off main valve at designated time.
Plumber and woman wait and wait and wait.
The plumbing system takes an hour to drain before work can start. Plumber replaces two shut-off valves under the sink.
HOA maintenance man turns water back on.
New shut-off valves work properly.
Woman pays plumber $180 for two hours of work that would have taken 20 minutes for a single-family residence.

And that would be the end of the story . . . except . . .

When the water is turned back on, some debris (scale) in the hot water pipes of the older plumbing system clog the shower valves in both showers.
Both showers that used to have full water pressure now have very low water pressure.
Fixing THAT is going to require another planned maintenance, and the HOA doesn’t want to approve it quickly due to the inconvenience to the other unit owners.

Bottom Line on Condo Plumbing

When you live in a development like a condo where some resources are shared, it just takes longer to get some stuff done. More coordination is necessary. More people are going to be in the mix for getting stuff approved, scheduled, and completed.

That doesn’t mean don’t buy one, it just means: know what you’re buying and make sure you’re ok with the trade-offs that condo living brings to your lifestyle.

Determining the Value of Texas Waterfront Property

Tue, 10 Oct 2023 18:37:01 GMT

Waterfront Property: How is Value Determined?

At the most basic level, the value of property, including waterfront property, is the price the market will bear. If you are considering purchasing (or selling) waterfront property, you need to read this article.

When neither the buyer nor the seller are distressed (facing foreclosure or other undue financial pressure), and the property has received normal market exposure, the price they agree on should be a reasonable reflection of Fair Market Value of the property.

If Only Finding the Right Price Were That Simple

Before this event can happen (buyer and seller coming together under contract), someone has to determine the listing price of the home, i.e. the price at which the home will be offered for sale.

For waterfront property (lake front property, beach front property), some of the factors that influence pricing are:

View
Waterfront footage
Access to the water (for people, for boats)
Storage, docks/slips for boats
Location on the body of water (for example, in a cove where the water might dry up in a drought)
Acreage
Guest accommodations
Condition of the septic system, or access to city sewer

In addition to someone figuring out a reasonable listing price for the property, the buyer side of the transaction also has to come up with what they think is a fair price, or the price they are willing to pay for the property. The seller side of the transaction is usually a Realtor working with the owners to determine pricing, or a Realtor using their own analysis (Competitive Market Analysis, or CMA) along with a certified residential appraisal.

Appraising Lakefront and Waterfront Properties

Over the years I have appraised many types of properties including vacant land, large acreage, ranches, subdivision homes, condominiums, small income properties and others.

However to this day I believe that lakefront or water front properties tend to be some of the most challenging assignments.

The challenge however lays mostly in the location. The farther out and the more undeveloped the submarket is, the more challenging the assignment. Take Point Venture for instance. This community is very far out there in the northern shore of Lake Travis, approximately 22 miles northwest of downtown Austin (which could also turn into a long commute). This particular submarket tends to bring more of the vacationer types, therefore, the market tends to be a little slower and marketing times tend to be longer, thus, making the availability of comparable sales pretty limited.

Appraisers rely heavily on comparable sales to determine the value of property, as part of the Sales Comparison Approach. Comparable sales are properties that share similar characteristics with the subject property that have recently sold. (“Recently” should be 6 months or less, but sometime it is necessary to look further back in time).

Finding and Analyzing Comparable Properties

This is where the challenge begins and it’s where you (or the appraiser!) really need to put your thinking hat on.

Early steps in the appraisal:

Determine the availability of comparable sales over six months, twelve months and sometimes a little longer.
Analyze the active listings and any pending sales.
Look for the best ones, the ones that are actually the most similar to the subject.
Consider the subject’s view.
Determine the actual lake frontage and whether or not it is in a cove where the dry season would really affect value (believe it or not).
Assess the availability of floating docks, lifts and so on.

These are things to consider – there are good reasons why people pay top dollar for these type of dwellings (the boating enthusiasts, the entertainers).

Do you think you could figure the value of these items?

A Quick Peek at a Matched Pair Analysis

One of the widely taught appraisal theories, the matched pair analysis works something like this (in the perfect world of course).

See the example below:

At this point, you’ve guessed it right if you guessed that the view adjustment would most likely be $20,000. Only if it were that easy.

You get the idea, but, of course in the real world it gets a lot more complicated than this.

Consider this example of three (theoretical) waterfront properties that recently sold:

So now, we’re getting a little closer to the reality of the complexity of appraising lakefront property.

In this particular example you can see that there are many factors to consider such as: the lakefront location, whether the property is in a cove or not, the actual size of the dwelling, whether there’s a dock or boat slip or not, pool or no pool, guest house or not, and last but not least, the lot size. Now try and guess the adjustments.

This time it gets a lot more complicated, now we get to do a more in depth analysis, so we start looking for other properties that are similar to the ones above and try to extract the dollar figures for those differences and come up with the adjustments.

This is only the beginning. Other things that we must consider include condition, quality, design, upgrades, updates, construction materials and the list goes on.

If you’re considering selling or buying lakefront property, consider getting a professional appraisal (from us, if you’re in Central Texas – the Greater Austin Area) so that you understand the factors that contribute to the value of the property, from the open market standpoint, which is also what a lender’s appraisal will consider as well.

House Appraisal: How to Find the Value of a Home

Tue, 10 Oct 2023 17:54:28 GMT

A House Appraisal: Find the Value of a Home

How do people find the value of a home? Meaning, what a home (usually their home) is worth?

Of the most common ways to fnd the value of a home, a formal house appraisal is the most accurate.

If you REALLY want to know what a property is worth, you need to know why most (cheap and easy) ways to find a home value aren’t accurate. If the value you find for a property isn’t right, then what good is that?

Ways to Find Home Value

On-line (Internet) “instant” home values websites

These are probably the worst way to find the home values – they rely on incomplete information, and the data is often out of date. Yeah – they’re fast but what good is fast if it’s wrong?

What a neighbor’s house sold for last year

Another unreliable source of information – unless the neighbor’s house is exactly like yours and the sales price has been confirmed by someone with access to the real numbers for the sale. Even then, the market TODAY might not be what it was when the neighbor’s house sold and we all know that timing matters a lot in real estate.

The tax records

Although these should be a good source of home values information, tax records are frequently wrong since the tax district doesn’t usually know about updates or renovations to a home unless the updates required a permit. Tax records also don’t show that the homes sales prices in an area are going up or going down. Tax values also rely on huge databases of information that may not be up to date.

A local real estate agent

An experienced real estate agent can give you information about other homes that have sold in your area, which can give you an idea of what your home might sell for if you are planning to sell it.

Unless you really are planning to sell, though, and are looking for an agent to list your home, a local agent might not want to spend the several hours that it takes to pull the best sales data for homes like yours that sold in the last few months.

A house appraisal

Otherwise known as a real estate appraisal, a house appraisal is the formal way to find the value of a home. Real estate appraisers have to have formal training, pass diffcult exams and use very well-defined ways (approaches to value) to figure out the actual, current market value of a home. Read the article Appraisal Steps: Determining Market Value of Property to understand what an appraiser does to figure of the value of a property.

Which Way Will Work For You?

Sometimes, you just want an idea of what the value of a home is. In that case, check out the on-line home value sites. Or, check out the tax records just for fun.

If you’re planning to sell your home, call a local real estate agent who knows your area well .

If your home is unusual (really big, really small, on a huge lot, heavily upgraded . . .) or you want the most accurate market value opinion for your home, you should bite the bullet and call a local real estate appraiser to do the job.

What is Included in the Square Footage of a House?

Tue, 10 Oct 2023 17:24:39 GMT

Measuring a House, What Counts?

Not all of the space under your roof counts as living space from an appraiser’s perspective. Some spaces don’t count towards the measured square footage of a home.

You should always have a local, qualifed professional determine answer your appraisal-related questions for any specifc property. Do not make decisions about real estate based on the information in this article or on this website.

We offer a home square footage measuring service for customers in the Austin Texas area, including Cedar Park, Round Rock, Georgetown, Leander, Liberty Hill, Pflugerville, Hutto, Taylor, Manor, Buda, Kyle, Bee Caves, Wimberley, Lakeway, Manchaca, Dripping Springs, Driftwood, Westlake, Del Valle and Lockhart.

What Do Appraisers INCLUDE in the Square Footage of a House?

Interior spaces that are conditioned spaces (heated, and cooled, if necessary) such as bedrooms, bathroom and living rooms.
Enclosed patios that are heated and (if the rest of the house is) air-conditioned and are similar in workmanship (quality) as the rest of the home. If it still looks like a patio with walls, an independent appraiser will need to make the call as to whether or not to include this space.
Finished attic space as long as it also conforms to the original structure (can’t just add carpet and call it a bedroom) and the ceilings are high enough, and the space is conditioned space because at this point it isn’t actually an attic anymore.
All of the interior closets, entries, utility rooms, unless they meet the exclusion descriptions, below.

What do Appraisers EXCLUDE in the Square Footage of a House?

Some common spaces are not considered to be living space and are therefore not included when calculating the square footage of a house:

Screened patios (and open ones as well).
Garages, unless they have been converted to living space. Read The Value of a Garage Conversi on.
Unfinished areas, regardless of the level in the home.
2nd floor airspace (for example: open space, above an entry, or a vaulted room).
The open area above a stairway on the second floor.
Basements. While this space may have value, any value will be determined separately from the rest of the home.
Detached living space such as an offce in a extra building on the property – these spaces are measured separately.
Spaces that are accessed only by traversing non-living space, like an enclosed storage area of a garage.

These spaces may be determined to add value to the property upon analysis of the comparable properties in an area, but they are not included in the square footage of the “main” home.

Some spaces, such as a finished basement, may (or may not) add value, but at a lesser rate than other finished (above- grade) spaces. This is determined on a case-by-case basis, based on the quality of the space and how the market has recently responded to similar homes.

Who Can Order an Appraisal?

Tue, 10 Oct 2023 16:50:33 GMT

Can Anyone Order an Appraisal Or Is Appraisal Ordering Restricted?

Lenders Order Appraisals For Loans, But You Can, Too

The basic rules of appraisal ordering:

Anyone can order an appraisal on their own home for any reason, from a licensed appraiser.
If the appraisal is for the purposes of re-financing, or purchasing a home, the appraisal needs to be ordered by the lender, to be accepted by the lender. You may never even get a copy.
Realtors can order appraisals, with their client’s consent, to help properly list the property at a price that is close to market value (to help it sell faster!).
Attorneys can order appraisals for clients. This often happens for an estate appraisal, or when the attorney’s client is getting divorced, and an appraisal needs to be ordered to determine the market value for the divorce paperwor
For PMI removal, check with your lender to see if they have any sticky rules about appraisal ordering (they shouldn’t, but better to know for sure!). You may need to get your home appraised to see if it qualifies for removing the PMI.
You can order an appraisal on your own when you want to protest your property taxes and need solid information about the value of your home.
And so on.

Things to Remember When Ordering an Appraisal

Make sure the appraiser knows the area well. You do not want to order an appraisal from someone who doesn’t do a lot of appraisals in your area because they won’t understand the local market as well as someone with more experience.
Make sure that everyone that will need to receive a copy is listed as as an intended audience so that they can get a copy of the completed appraisal.
Make sure you know what to expect, and how to prepare for the appraisal inspectio n.
Read our page about Appraisal IQ so you know what to expect from our service.
Read our FAQ.
Ask, Ask, Ask.