Putting your Las Vegas home on the market is one thing, but adequately preparing it for buyers is a whole different matter. Home staging is the term used by real estate professionals to help prepare your house so that it will look its absolute best. Realtors will tell you that buyers usually make a decision about a home within the first ten seconds of their visit. Therefore, a wonderful first impression is imperative if you are to sell your home quickly. Should you stage your Las Vegas home? If so, what exactly is involved with home staging?
Although your real estate agent or broker is knowledgeable and skilled on how to market your Las Vegas home, they may not be particularly adept at interior design. That is where a home staging professional comes in. If you use one, they will work toward helping you eliminate clutter, rearrange furniture, and improve your home’s curb appeal. This may involve moving a painting from one wall to another, removing a bulky chair out of a crowded room, trimming the front yard shrubbery, etc. In some cases a Las Vegas home staging professional may recommend that you bring in additional furniture, but you must realize that there is an extra cost involved if you choose that option.
Your real estate agent should be able to refer a home staging professional to you. Most Las Vegas home staging professionals will offer a free written estimate of their recommendations and services. Ask for references from the home staging professional and call them to verify their work.
If you choose a professional who truly excels at home staging, you could recoup the costs of this service through a higher selling price.
You hear it everywhere. The baby boomers are starting to retire. The stock market and real estate market will suffer as money is pulled out. This hardly seems true for real estate.
Thoughts on the Future of the Real Estate Market
Baby boomers are those individuals born during the period from roughly 1945 to 1964. Following World War II, peace and economic prosperity occurred for roughly twenty years. Along with this came an explosion in the birth rates in the United States. This increase in birth rates created a bulge in the overall population, to wit, the baby boomer generation.
As economists and pundits look to the future, they worry about what will happen when baby boomers move out of the job market. Who will replace them? What happens to their money? Will the drain on the stock market from 401k distributions wipe out the stock market? What about real estate where baby boomers are starting to pass their peak earning years? Is everything going to crash? No.
The first reason the real estate market will not die is the boomers. They do not just disappear when they retire. Most are continuing to invest in real estate as they start receiving retirement distributions. In 2004, this fact was evidenced by the fact that of all home sales, 35 percent were for second homes. Clearly, the boomers will remain active for some time.
There is also a new generation starting to be introduced to the real estate market. While it is true that baby boomers are the largest population bulge we have seen, one has to keep in mind that the boomers had their own offspring. The second largest population bulge we have seen are these children. They are now entering there twenties and thirties, which means they are entering the real estate market as buyers – often borrowing from their parents for down payments.
Immigration is a controversial subject. Regardless of your view, the undisputed evidence shows a large number of legal immigrants coming into the country since 1970. Obviously, these individuals and families represent another pool of buyers.
Despite the wailing of so-called experts, the real estate market should continue to purr along as it always has. Real estate is still one of the best investments. Yes, there will be fluctuations, but the prophecies of doom and gloom are unsupported by the facts.
With property prices seemingly on the rise and rising quickly in Tampa, there is a lot of talk about a real estate bubble in the US and dire predictions that the so-called bubble could burst, leading to a lack of confidence on the part of investors and people seeking a second home. But while this talk of a bubble may be true in some parts of America, it isn’t justified in Florida, particularly in the Tampa Bay and Clearwater areas.
Florida as a whole is enjoying a rise in property prices which promises to be a long term trend. There are many reasons for this.
Demand for real estate in Florida is increasing. Homes are being bought for various reasons. Both American and European holiday makers view Florida as a premier summer holiday location and flock there each summer and historical evidence suggests that this figure is rising sharply and is having a major economic impact on the region according to VISIT FLORIDA research.
Historic Visitor Numbers (in Millions)
1999 58.9
2000 72.8
2001 69.5
2002 73.9
2003 74.6
2004 79.7
Historic Economic Impact
Total Tourism Spending 1999-2004:
1999 – $44.6 billion
2000 – $48.5 billion
2001 – $48.6 billion
2002 – $49.5 billion
2003 – $51.5 billion
2004 – $57.0 billion
Total State Sales Tax Revenues from Tourism 1999-2004:
1999 – $2.7 billion
2000 – $2.9 billion
2001 – $2.9 billion
2002 – $3.0 billion
2003 – $3.0 billion
2004 – $3.4 billion
Number of Persons Directly Employed by Tourism Industry 1999-2004:
1999 – 826,200
2000 – 842,900
2001 – 864,500
2002 – 862,900
2003 – 871,000
2004 – 912,700
This growth in visitors is due to Florida’s many attractions, many of which are near to Tampa Bay. The superb beaches, the night life opportunities, golf and other sporting opportunities whether playing or being a spectator, the theme parks and adventure worlds, Disney, of course – and the many areas of unspoiled beauty. And, if anything, this annual visitation is set to increase again as the Super Bowl comes to Tampa in 2009. This will be the fourth Super Bowl to be held in Tampa. This has a dramatic effect on our area’s prosperity.
The increasing economic prosperity also makes Florida in general and Tampa Bay in particular a good place to find a job or start a business. In 2004, Florida was ranked #2 as one of the best places in America for start-ups. More and more companies are also relocating their headquarters to Tampa, as well. Tampa is now being called the “Gateway to the Florida High Tech Corridor”, because companies are being offered a matching grant program that has generated more than $120 million in applied research. 225 companies have already taken advantage of this.
The area has relatively low real estate prices and a lower cost of living and higher employment statistics compared to the rest of Florida and to other states in America, despite recent increases. The median value for a home in Florida was $189,500 last year, significantly less than similar homes in California where the median home value was $474,370. (Source: www.investmentu.com/IUEL/2004/20040927.html ). In Tampa Bay, it was less again.
Florida, including Tampa, also enjoys the advantage of having slightly more favorable property taxes compared with other parts of the US, no state income tax and better car insurance rates. The education system has undergone considerable improvement over the past number of years. And the Tampa area also has some of the best commute to work times in the country.
Tampa Bay is perhaps the ideal place not just for the baby boomer buying a second house or holiday home, nor just for the property investor seeking to increase their footprint in the holiday rental market, but also for people starting out in life or those seeking a retirement home.
There have been several new developments in Tampa Bay Florida real estate and Clearwater Beach real estate holdings; the plans for developing downtown Tampa, especially the Rivergate area, are potentially very exciting indeed, according to recent articles in the Tampa Bay Business Journal.
In short, Florida as an area for either relocation, investment or a second home is currently one of the most attractive in America and likely to remain so for some time. Due to the recent economic pressure on the US as a whole there might be a slight slow down in terms of escalating appreciation but Florida remains a great place to come and a great place to invest, especially Tampa Bay real estate and Clearwater Bay real estate, which are right in the heart of the potential growth areas.
No bubbles bursting here, just opportunities galore!
When talking to people who are trying to sell their house I’m often asked the question, “Why should I sell my house to you?”
That’s a great question. Today’s house seller has lots of options: they can list their house with a real estate agent, they can try to sell the house themselves or they can sell their house to a real estate investor. None of these choices is necessarily better than the others: they each have their own advantages and disadvantages.
Here is what I say when asked why someone should sell their house to me:
I’m fast.
In many cases, sellers are in a rush to get their house sold. Maybe they’re facing foreclosure or they’re settling a divorce. Sometimes the seller has moved because of a job and needs to sell the house quickly to avoid two mortgage payments. Or someone might inherit a house and they don’t want the hassle of dealing with the repairs and marketing necessary to sell the house.
Most people who try selling their house themselves or through a real estate agent find that it is anything but a “fast” process in most cases. Unless you are willing to sell your house at a significantly reduced price, in many markets you could find yourself waiting one to three months before you accept an offer.
On the other hand, because I’m an independent investor with private funds I can often close a house purchase in 7 days or less.
My offers are flexible
I make my offer fit the seller’s needs. If the seller wants to close quickly, that can be arranged. If the seller wants cash all at once or a monthly cash flow, I can do those, too. I can also make up past payments and take over current payments to immediately relieve money burdens on the seller.
I can be a lot more flexible with my offers than the “traditional” offers sellers typically receive. That’s because I’m independent and not part of a bank bureaucracy which has to follow lots of rules. I’m also aware of possible creative solutions to meet sellers’ needs that your average home buyer wouldn’t think of.
I’m open-minded.
I might buy someone’s house when no one else will. In many cases I buy houses that have fire damage, termites, mold, foundation problems, roof problems or need major repairs. Houses with these conditions scare most buyers and real estate agents hate listing them because they know such houses are hard to sell.
I actually enjoy talking to sellers with houses like these because I can see the house’s potential value after all the repairs are made. I’m also not worried about extensive repairs as long as the after-repaired-value of the house justifies the expenses.
In conclusion, I encourage sellers to investigate all avenues of getting their house sold in the way that best meets their needs. If they decide that working with me to buy their house makes the most sense, then I’m more than happy to help.
Home staging tells homeowners how to prepare and market their home for sales in the real estate market. Professional home stagers are professionals that help you in preparing your home for sale. They help you create a very good first impression on potential homebuyers by taking care of your house and its appeal.
Professional home stagers rearrange your home’s furniture, making it more organized. They help you redesign your house so that it appeals to potential homebuyers in the market. They can also suggest and in some cases, purchase furniture or fixtures to make your home show it’s absolute best!
To put it differently, they make your house sellable with their design experience and expertise. Home staging is particularly useful where prices appreciate slowly and finding a buyer takes a lot of time.
The Home Staging Process
The first impression is the key to a good offer (read: high price) and quick sale. Most buyers make up their mind even before entering the house! That is why it becomes so vital to create a winning first impression. A real estate agent may be good at marketing your house, he/she may know what makes it sell but in all probability he may not be able to help you do it. This is where professional home stagers come in. They help you prepare your house for the best first impact.
Zeroing in on a professional home stager is not difficult. You can ask your friends and acquaintances who have recently sold a house for reference. Your real estate agent or company can also help you in this regard. In all probability they might have already utilized the services of the professional home stagers in your area.
Once you have zeroed in on a few home stagers, the next step is to find out the cost. It is always good to get an estimate from a few home stagers. Mostly it is a quick and accurate process. You should then make calculations and comparisons. It is always a good idea to discuss estimates with them before making a final decision.
It is also important to take into account others factors like the state of your home, asking price and average time the houses are on sale before a deal is clinched. Asking price is the most important factor. If the asking price is low, it may not be feasible to hire professional home stager, more so when the higher price is not in tandem with the cost involved. All these factors go a long way in helping you make an informed decision of hiring a professional home stager.
On occasion your real estate agent may also contribute to the charges of your professional home stager. This is done when your real estate agent is convinced that the charges are reasonable and the investment is worthwhile.
Doing It On Your Own
If you don’t want to spend money and hire professionals you can do home staging on your own. Here are few tips on do-it-yourself home staging:
1) Clean your house, yard, kitchen bathrooms, drapes, and carpets. Wash the windows.
2) Make your home organized and less cluttered. This will make your home look neat and spacious. Remove all the unnecessary objects.
3) Get your home repainted.
4) Check the floor. It might need refinishing.
5) Change furniture and fixtures to make your house more appealing. You can buy try borrowing or renting.
6) Remove unnecessary pictures. Rearrange others.
Home staging can help your house sell faster and at a better price than you probably would be able to without any preparation. The thing to remember is that your home should appeal to a wide variety of buyers. The best way to do this is to use neutral colors and rich fabrics.
As you grow older, the issue of wealth building comes front and center. Wealth building simply refers to increasing the net value of your total assets. Wealth building over time is one of the advantages of home ownership.
Building Equity
Owning a home can help you build wealth in two ways. First, you build equity by paying down your mortgage. A certain percentage of each mortgage payment goes towards a reduction in the total amount owed. Typically, payments in the first few years of the mortgage are primarily applied to interest on the loans. As time passes, however, more and more of each payment is applied to the outstanding loan amount. Before you know it, the $300,000 loan is down to $50,000 and you’ve gained $250,000 in wealth.
Appreciation is the second wealth building advantage to home ownership. Each year, the value of your home will increase or decrease slightly based on market prices. Over time, real estate has always appreciated in value. In the current market, homes in some parts of the country are appreciating at rates as high as fifteen to twenty percent! Appreciation is a very popular subject with homeowners.
Wealth Building Example
Let’s look at a simple demonstration of how advantageous home ownership can be. Assume you buy a home in 2005 for $400,000 and, for the purpose of simply mathematics, pay no down. Over the next 10 years, your mortgage payments reduce the outstanding mortgage by $100,000 and the home increases in value to $600,000. The value of your home as a net asset has grown to $300,000 [$600,000 minus $300,000]! If you had rented during this period, you would have missed out on $300,000 in wealth. This simple example should show you the advantage of home ownership.
Historically, home ownership is one the best ways for families to build wealth. If you don’t currently own a home, you should start looking for one.
From top-dollar homes in the San Francisco Bay Area to sprawling mountain homes in the Colorado Rockies, discriminating homeowners are demanding custom designs and finishes in their kitchens. In particular, they are looking to express their individuality and distinct design preferences with the fast growing design material of choice — concrete.
In fact, concrete countertops have become somewhat of a status symbol for kitchens, rivaling granite and other high-end countertop surface options. Consumer Reports Magazine (August 2004) ranked concrete highest for its “customization” and “exclusivity” among high-end kitchen countertops.
As a custom product, the amount of time and craftsmanship required to produce concrete countertops places them as the most labor-intensive and priciest among leading countertop materials.
However, concrete countertops are becoming more accessible for those on a modest budget. The latest do-it-yourself (DIY) trend to captivate homeowners and builders is building your own concrete countertop. This phenomenon has gained popularity largely due to Cheng’s best-selling book Concrete Countertops: Design, Forms, and Finishes for the New Kitchen and Bath (Taunton Press, 2002). According to Cheng, there is little monetary investment in making concrete countertops, yet the creative gains of working with concrete are plentiful.
THE SHOWSTOPPER
Increasingly, homeowners are moving away from the monotonous, manufactured look of traditional countertop surfaces and choosing concrete for its earthy, timeless appeal. Plus, the options for personalizing concrete countertops are endless: one can color, polish, stamp and stain concrete or imbed personal objects like stones, seashells and fossils into the countertop’s surface, adding sentiment and character. Functional features such as drain boards, soap dishes, and trivets can also be incorporated to suit the homeowners’ own needs and lifestyle.
Concrete is slowly becoming demystified as characteristically cold and industrial. In contrary, this age-old material is warm and surprisingly tactile; people cannot help but touch their smooth, polished surfaces. Real estate agent Joy Rasmussen, who has recently sold her mountain home — a short-term investment property in Steamboat Springs, CO — recounts her visitors’ experiences with concrete: “When I had open houses, visitors gravitated to the concrete countertops — many people around here have never seen them”.
Joy’s 2,265 sq. ft. mountain home was custom build by her husband, Ken Otterman, along with KJ Otterman, president of Classic Special Custom Homes. They built pour-in-place concrete counters for the home’s kitchen and three bathrooms by using Concrete Countertops as their guide. The sand-colored concrete countertops were polished smooth, then paired with natural slate of varying colors — like charcoal, rust and gold tones — that forms the backsplashes in the kitchen and baths. As a design accent, small rectangular slate tiles were added to the rim of the bathroom sinks, which provided a unique detail to the custom vanities.
When Joy and Ken decided to sell their house, their investment in concrete countertops proved its value. “We were able to list the house $20,000 over market value, and had no problems selling it,” comments Joy, while discussing the long list of upgrades throughout their house, including knotty pine solid doors, natural slate wall accents and hardwood floors. “The concrete countertops were easily the most unique and impressive of all the finishes. I believe they were a huge part in adding value to the home. Around here, all you see in homes are granite countertops —and I really think homebuyers are getting quite numb with granite.”
“Concrete countertops are a unique offering to homebuyers who see the same finishes used in house after house they visit,” explains Joy, offering her observation as a seasoned realtor. “Having concrete countertops almost gives you bragging rights — you have something different from your neighbors.”
BREAKING THE MOLD
Another advantage of concrete is its adaptability in either modern or traditional settings, especially when coupled with other materials like varied metals, wood or stone. “Concrete adds so many [possibilities] to stone, and the combination with slate, which is hugely popular here, gives the mountain homes an overall warm, natural touch,” says Joy.
Joy and Ken have since built a much larger home (4,000 sq. ft.) that offers expansive views of the Steamboat Ski Resort and is meant to serve as a long-term investment for the couple. They’ve also expanded their list of custom finishes, including hand-troweled walls, elegant oil-rubbed bronze hardware, knotty pine doors that arch at the top, cabinets in a natural, knotty alder, and their favorite — concrete kitchen countertops.
Unlike in their previous home, KJ and his specialty crew poured charcoal-colored countertops using the pre-cast method in the unfinished basement of the new home. Before pouring the concrete, they sprinkled an array of semi-precious stones in the mold including Leopardskin, Moonstone, Mother-of-Pearl and Turquoise. After the surface was ground and lightly polished, the finished result was an impressive blend of colors, “By far, the Mother-of-Pearl was the most incredible,” says Joy.
The L-shaped concrete countertop has a rough, rustic stone appearance, complementing its rugged country surroundings. An integral drain board and trivets provides function and added interest to the concrete countertop. Natural slate backsplashes, distinct wall accents, and a butcher block countertop at the kitchen island all resonate with the traditional warmth and earthiness of the concrete countertops.
Joy and Ken’s respective backgrounds in real estate and custom homebuilding, and as investment homebuyers, have helped them realize that concrete countertops can add tremendous aesthetic and financial value to a home. Concrete’s customization and “show-stopping” appeal is like no other countertop surface. Cheng is a proponent of emotional aesthetics and building homes that capture these emotions, as in the case of Joy and Ken Otterman. Cheng concludes: “People really want differentiation, something personal, something custom – and concrete can do that for them.”
You can purchase property for cash, of course, and if you have it, this can be the best way to get a great price. What if you don’t have the cash? Here are some of you other options.
Partner To Purchase Property
Join the local real estate investing group in your town. Then start taking notes, names, and numbers. Our group here in Tucson meets once a month. The best part of the meeting is the “I have / I want” part, where anyone can stand up and tell the rest what they are looking for, or what they have to sell. I have a list of people now that are looking for everything from mobile home parks to fixer-upper homes.
How do you use this information to purchase property? Here is one of several ways: Make an offer on a property, and include in the offer the right to assign to someone else or bring in a partner. Call the people on your list until you find one that will put up the down payment or arrange financing as a partner.
I announced that I had some money at one meeting, and three days later got a call from a couple that had the financing and down payment on a project arranged, but needed a partner to bring in the money to rehab the property. If the deal is good, you can find the money. If you don’t have a real estate investors group nearby? Start one.
The Two-Note Technique
This creative way to purchase property sounds more complex than it is. You make an offer for, let’s say, $360,000 on a rental property, when the seller is asking only $350,000. Why, if the seller is asking $355,000 and probably only expects to get $340,000, do you offer more than the asking price? Because the seller will be financing the whole deal, and he needs cash, so you’ll be selling one of the loan notes. Let me explain.
You offer two mortgage notes, one for $300,000, and the other for $60,000. The payments on the first might be around $2,000, and $400 per month on the second. You’ll have total payments of $2,400 per month (Be sure you still have cash flow). As part of the offer, you arranged for the sale of the second note at closing for $45,000. That’s all a note investor is likely to pay for an “unseasoned note”. The seller gets $45,000 in cash, and payments of $2,000 every month for 30 years. The note investor gets your other payment of $400/month.
The numbers will be all different in every deal of this sort. Maybe you have some cash. Maybe the seller needs more cash, so the second note will have to be for a higher amount. Interest rates, balloons, and your credit rating all affect what a note buyer will pay for the note too. The point is that you can create cash out of seller financing, meaning you can purchase property with nothing down, or with less down.
No-Doc Loans
These loans used to be harder to find, and may still be in your area, but they’re everywhere around here right now. The idea is that you don’t need documentation of a job or even income, hence the name “no-doc.” The bank loans based on your credit score and the property. I can get 95% financing on a $300,000 house without any job or income right now.
The catch, apart from needing either great credit or a larger down payment, is that the interest rate will be higher. Now, suppose you find a $100,000 fixer-upper and can put the $5,000 down payment and the repairs on your credit cards. In this case, the few thousand in interest over the six months you own the house isn’t much if you intend to make a $25,000 profit.
On the other hand, the higher interest will really add up if you are going to live in the house for 30 years. At the moment, the banks around here seem to want about 2% more for these loans than for conventional mortgage loans, and that is a lot of extra interest over the years. Bottom line? No one way is right in all cases. That’s why you need to know many ways to purchase property.
Many people ask “what is fractional ownership?” and the closely related question “Is it timeshare? In this article I will attempt to answer these questions. This article is concerned exclusively with the fractional ownership of leisure/luxury assets. However most of the principles would apply equally to the fractional ownership of a practical item (e.g. for business).
Definition of Fractional Ownership
In its broadest definition, fractional ownership is any arrangement where a group of people (numbering from 2 to 10 or more) share the ownership of an asset and also share certain rights to use the asset. The use of the word “ownership” in the definition therefore excludes timeshare arrangements, where there is no ownership of the underlying asset. Unfortunately however, some so-called fractional ownership schemes are closer to timeshare than they are to true fractional ownership. When investigating whether to purchase a fraction it is essential to know what your relationship to the asset purchased is. The best arrangement is to be identified as the legal joint owner of the asset (or in the case of multiple assets, the owning organization).
Types of Fractional Ownership
The most cost-effective form is where a group of individuals decide to purchase an asset jointly. They then decide on the exact asset to be purchased, draw up ownership documents (perhaps with the help of a legal firm) and purchase and manage the asset themselves. This avoids the sometimes substantial profit-margin that developers charge when selling fractional properties. This approach does have disadvantages, e.g. the amount of paperwork involved and the possibility of falling out with your fellow fraction owners (over cleaning, maintenance etc.)
Second in terms of cost-effectiveness would be a developer or owner-led scheme, where the individual fractions were being sold direct from the developer/owner (but where there were no expensive additional services bundled with the purchase). There will have to be a profit-margin associated with this type of arrangement, since the developer/owner is incurring additional legal and administrative costs. If fractions can be sold individually (without all the fractions of an asset being sold) then they are also taking the risk of having unsold fractions tying up their capital.
The above schemes blur into the next category, which I will call clubs. These are sometimes called Ownership Clubs, Private Residence Clubs, Destination Clubs etc. etc. Where they differ from simple developer/owner-led schemes is in the level of luxury/services provided and (sometimes) in the level of ownership. None of these terms have a particular legal meaning so it is up to the purchaser to investigate issues of ownership, booking arrangements, exit arrangements etc. A the extreme end of this group there are some similarities with Timeshare -so be warned!
How Much is it Costing Me?
Here I don’t mean in absolute terms, I mean how much is it costing in excess of the amount that I would have paid for the asset as a whole. Always try and do a comparison with a similar asset purchased outright to gain an idea of what the developer/owner’s additional costs and profits are. At the very least it might help you to negotiate a better price if you do decide to buy! You can and should do a similar comparison on the management fees (and pay special attention to any rights to vary them in the future).
Conclusion
True fractional ownership isn’t timeshare, but some of the schemes marketed as fractional ownership are. Be warned and do your homework if thinking about purchasing. if thinking about purchasing.
Property taxes are one of the largest line item costs incurred by apartment owners. However, many owners do not appeal effectively. Even though owners realize that property taxes can be managed and reduced through an appeal, some view taxes as an arbitrary estimate provided by the government which can’t effectively be appealed. It tends to boil down to the old adage, “You can’t fight city hall”.
Fortunately, the property tax appeal process in Texas provides owners multiple opportunities to appeal. Handled either directly by the owner or by a property tax consultant, this process should involve an intense effort to annually appeal and minimize property taxes. Reducing the largest line item expense has a significant effect in reducing the owner’s overall operating expenses. While it is not possible to entirely escape the burden of paying property taxes, it is possible to reduce taxes sharply, often by 25% to 50%.
Why some owners don’t appeal
Some property owners don’t appeal because they either don’t understand the process, or don’t understand that there is a good probability of achieving meaningful reductions in property taxes. Some owners believe that since the market value of their property exceeds the assessed value, then it is not possible to appeal and reduce the property taxes. Although appeals on unequal appraisal are relatively new, there is a clear-cut way to appeal property taxes at the administrative hearing level based on unequal appraisal. Unequal appraisal occurs when property is assessed inconsistently with neighboring properties or comparable properties. Also, some owners are reluctant to hire a property tax consultant, even though many consultants will work on a contingent fee basis, in which there is no cost to the owner unless property taxes for the current year are reduced.
Overview of appeal process
The following are the primary steps in the annual process for appealing property taxes:
Request notice of accessed value
File an appeal
Prepare for hearing
Review records
Review market value appeal
Review unequal appraisal appeal
Set negotiating perimeters
Administrative hearings
Decide whether binding arbitration or judicial appeals are warranted
Pay taxes timely
Requesting a notice of assessed value
Property owners have the option of requesting a notice of assessed value for their property annually. Section 25.19g of the Texas Property Tax Code provides the owner the option to request a written notice of the assessed value from the chief appraiser. Owners benefit from requesting and receiving a written notice of assessed value for each property because it ensures they have an opportunity to review the assessed value. This notice should be sent on an annual basis. The appraisal district does not have to send a notice of assessed value if the value increases by less than $1,000. However, if an owner was not satisfied with a prior year’s value and the value remained the same, the appraisal district probably will not send a notice of the assessed value for the current year. In this situation, the owner might forget to protest since a notice of assessed value for the property was not received.
How to file and appeal
On or before May 31st of each year, the property owner should file an appeal for each property. However, while many owners are comfortable with an assessed value, in many cases there is a basis for appealing. Two options for appealing include:
1. unequal appraisal, and
2. market value based on data the appraisal district provides to the owner before the hearing.
You can appeal by completing the protest form provided by the appraisal district and indicating both excessive value (market value) and unequal appraisal as the basis for appeal. In addition, the property owner can simply send a notice that identifies the property, and indicates dissatisfaction with some determination of the appraisal office. The notice does not need to be on an official form, although the comptroller does provide a form for the convenience of property owners. (You can access the protest form at www.cutmytaxes.com .)
House Bill 201 – helpful information
House Bill 201 is the industry jargon for a property owner’s option to request information the appraisal district will use at the hearing, and to receive a copy 14 days before the hearing. The name House Bill 201 is derived from the bill used to enact the law. The details for House Bill 201 are located in sections 41.461 and 41.67d of the Texas Property Tax Code. When filing a protest, the property owner should additionally request in writing that the appraisal district provide a copy of any information the appraisal district plans to introduce at the hearing. The appraisal district will typically require the property owner to come to the appraisal district office to pick up the information and charge a nominal fee, typically $0.10 per page. While the cost for House Bill 201 requests are quite low (typically $0.50 to $2.00 per property for residential and commercial) the information is invaluable in preparing for the hearing. In addition, filing a House Bill 201 request is important because it limits the information the appraisal district can present at the hearing to what was provided to the property owner two weeks before the hearing.
Preparing for the Hearing
Start by reviewing the appraisal district’s information for your property for accuracy. If the appraisal district overstates either the quality or quantity of improvements, this will justify a deduction. The next step is to review the information on market value and unequal appraisal provided by the appraisal district in the House Bill 201 package. If the subject property is an income property, review the appraisal district’s income analysis versus your actual income and expense statements. Consider the following areas as opportunities to rebut the appraisal district’s analysis:
Gross potential income
Vacancy rate
Total effective gross income, including other income
Operating expenses
Amount of replacement reserves
Net operating income
Capitalization rate
Final market value
Many property owners and consultants start with the actual income and expense data, and use one or two of the assumptions provided by the appraisal district. However, they primarily utilize information from the actual income and expenses in preparing their own income analysis and estimate of market value for the subject property.
When comparable sales are the primary issue in determining market value, start by reviewing the comparable sales data provided by the appraisal district versus the assessed value for your property. Convert the sales prices from the appraisal district to either a per square foot or per unit basis. Then compare the sales to the per square foot or per unit assessment for your property. Sales can be helpful during the hearing.
The cost approach is not typically used in the property tax hearings except for brand new or relatively new properties. If your property is new, the appraisal district will probably want to review the cost information and you probably won’t want to show it to them. In many cases, the actual cost of a property is higher than the estimate provided by the appraisal district. If this is the case, you will likely want to appeal on unequal appraisal instead of on market value. No matter how good your argument or how passionately it is expressed, the appraisal district staff and Appraisal Review Board (ARB) members tend to believe that cost equals value for new properties.
Deferred Maintenance and Functional Obsolescence
Another issue that is important for the market value appeal, and to some extent for a unequal appraisal appeal, is information on deferred maintenance and functional obsolescence. Deferred maintenance could include items such as:
rotten wood
peeling paint
roof replacement
substantial repair
landscaping updating and other similar items
Most appraisal districts give minimal consideration to requests for adjustments based on deferred maintenance, unless the property owner provides repair costs from independent contractors. There are some exceptions where a cooperative informal appraiser or sympathetic ARB will take an owner’s estimate of deferred maintenance and make adjustments based on those costs. Most appraisers and ARB members are much more inclined to make adjustments if third-party cost estimates are provided. In addition, the appraisers and many ARB members are inclined to only deduct a portion of the total cost using the argument, “we’ve been giving a replacement reserve allowance for this item for the past years and it’d be double-dipping to deduct the whole value off it in the current year.” While this is an incorrect appraisal argument, it does tend to be the practice at many appraisal districts. The reality is, the cost of curing deferred maintenance is deducted from the offer by a prospective buyer.
Examples of functional obsolescence would be a three-bedroom apartment unit that only has one bathroom, or a two-bedroom apartment that does not have washer/dryer connections in an area where those connections are common. Another example would be an apartment that has a window air conditioner in an area where central HVAC is typical and expected.
Unequal appraisal analysis
The Texas Property Tax Code, section 41.43(b)(3), provides for appraising or appealing on unequal appraisal including ratio studies and “a reasonable number of comparable properties appropriately adjusted.” Virtually all unequal appraisal appeals involve a reasonable number of comparables that are appropriately adjusted. Comparables are similar properties.
This is primarily because of the difficulty and cost of performing a ratio study. Historically, the position of many appraisal districts was that the property owner needed to get a fee appraisal for each comparable property and compare the market value estimated by the appraiser to the assessed value. The cost of getting multiple appraisals made this process financially impractical. Compiling a reasonable number of comparables appropriately adjusted is simple and straightforward. The first step is to choose a reasonable number of comparables. Usually four to five comparables is the typical number used at a property tax hearing, but in some cases, property owners choose ten to thirty. In some cases, there may only be one to four comparable properties that merit consideration. Most unequal appraisal presentations include three to ten comparables. The number of reasonable comparables depends on the location, type, size and age of the property. For example, there would be fewer five-year-old bowling alleys in the northern part of Harris County compared to recently built apartment complexes.
After choosing a reasonable number of comparables, array them in a table format, including fields of data such as account number, net rentable area, year built, street address, assessed value and assessed value per square foot.
You should also review the information in the appraisal district’s House Bill 201 packet on an unequal appraisal. In many cases, the appraisal districts unequal appraisal analysis will document a reduction in your assessed value! If the appraisal districts unequal appraisal analysis documents a reduction, either the informal appraiser or the ARB should make the adjustment in assessed value for you. Having the opportunity to get an assessed value reduced automatically based on the appraisal districts unequal appraisal analysis is one of the reasons to appeal every property every year.
Completing Hearing Preparation
After reviewing the appraisal district’s information on your property, the House Bill 201 package, and your market value and unequal appraisal analyses, determine the strengths and weaknesses of each approach and decide which basis of appeal provides the best opportunity for a meaningful reduction. Although appeals on unequal appraisal have clearly been the law of the land since 2003, some appraisal districts and review boards have chosen to disregard the option for unequal appraisal put forth by the Texas Legislature. Although there is litigation underway which should resolve this issue within the next year, it would be prudent to visit someone who is knowledgeable in local property tax appeals to determine whether the county appraisal district and ARB in your area are considering appeals on unequal appraisal.
Set Negotiating Perimeters
After reviewing the information, it is important to set the highest level of assessed value you will accept at the informal hearing because after you accept an assessed value, the appeal process will be complete for the year and you will not be able to appeal further.
Administrative Hearing Process
The two steps to the administrative hearing process are the informal hearing and the appraisal review board hearing.
The Informal Hearing
The following procedure and rules are typical at the informal hearing:
· Meet with an appraiser representing the appraisal district. You should be polite and prepared at this meeting. While many property owners are frustrated and angry at the high level of real estate taxes, the appraisal district appraiser does not control the tax rate set by various entities nor the policy regarding property taxes in the area or the state. The appraisal district appraiser is trying to execute his job in a professional manner and appreciates it when property owners work with him on that basis.
· Provide the appraiser information on your property and he will review that information and information he has available.
· The appraiser will likely make an offer to settle the assessed value of your property fairly quickly. You can either accept the value or negotiate further. Either way, you should know within ten to twenty minutes whether the appraiser will offer an acceptable value. If the value is acceptable, conclude the negotiation by agreeing to the value for the current year. If the value offered is not acceptable, ask to go forward with an ARB hearing.
Appraisal Review Board Hearing (ARB)
The ARB hearing panel consists of three impartial citizens selected and paid by the appraisal district. The age of most ARB members ranges from fifty to eighty. There is an unfortunate bias in the system since the ARB members are selected and paid by the appraisal district, but most ARB members are reasonable people who want to make appropriate decisions.
Like the appraisal district appraiser, the ARB does not set tax rates or tax policy. The members are also not responsible for the effectiveness of local government. It is unlikely to help your case if you complain to the ARB members about either the high level of property taxes or the poor quality of some aspect of local government.
The ARB will expect you to make your presentation in about three to ten minutes. They will typically wait patiently while you make your presentation and may have questions after you conclude. An appraiser from the appraisal district, who may or may not be the same person who attended the informal hearing, will represent the appraisal district at the ARB hearing. The appraiser will comment on the evidence you presented and will often present other information the appraisal district has available. If you requested a House Bill 201 package for your property, it substantially limits the evidence the appraisal district appraiser can offer at the hearing. The ARB members may have questions after the appraisers presentation. Then the property owner will be given a final opportunity to rebut evidence presented by the appraisal district appraiser and quickly summarize the evidence. The ARB members strongly prefer you not repeat your entire presentation at this point.
After hearing the evidence, the ARB members will confer and make a decision. This decision is not subject to negotiation and they will not revise the decision if further evidence is presented. When this decision is announced, the hearing is effectively over. The ARB will send a letter two to four weeks later summarizing their decision and notifying the owner of a 45 day limitation from the date receipt of the ARB decision to either request binding arbitration or file a judicial appeal.
Binding Arbitration or Judicial Appeal
Beginning September 2005, owners of properties with an assessed value of $1 million or less may file a request for binding arbitration. The owner must file with the appraisal district no more than 45 days after receipt of the notice of the ARB’s decision. The binding arbitration option is interesting because it includes a loser pays provision. The appraisal district pays for the arbitrator’s fee if the final value is closer to the owner’s opinion of value, and the owner pays for the binding arbitration if the final decision is closer to the appraisal district’s opinion of value. Binding arbitration was passed to provide an alternative to judicial appeals, which can be expensive to prosecute.
Many owners pursue judicial appeals to further reduce property taxes. In 2005, O’Connor & Associates filed over 1,200 judicial appeals on behalf of property owners in the state of Texas. The judicial appeals can be expensive if the property owner and attorney don’t understand the process and have a plan in place to minimize the cost of legal and expert witness fees. Judicial appeals are typically successful. However, success requires cooperation from the property owner, such as providing responses to questions, documents and a deposition if requested. The judicial appeal is meaningful as an option to minimize property taxes since it reduces the base value. This is important because the appraisal district and ARB consider the base value in the subsequent year when setting the administrative hearing value.
Conclusion
Property owners can generate substantial reductions in property taxes by appealing annually. Consider appeals on both market value and unequal appraisal and obtain the House Bill 201 information when preparing for the appeal hearing. Property owners should consider all three levels of appeal: informal hearing, ARB hearing and judicial appeal/binding arbitration. While the ARB hearing and judicial appeal/binding arbitration can be an intimidating process, each is straightforward once you understand the mechanics.
