Audio transcript
Mark Haslett: We're visiting with Brent South of the Hunt County Appraisal District. And Brent, you recently went around the county to several towns, having some public forums answering folks’ questions about the appraisal process. So if you would, let's hear a little bit about what people had to say; what their questions and their concerns were. Of course, with property values being so very high, almost ridiculously high these days, I'm sure that people that had quite a few questions and concerns.
Brent South: Sure, Mark. One of the reasons we wanted to go throughout the county and had these town hall meetings is because we're in an extremely aggressive real estate market right now. This is one of the most aggressive markets we've ever seen here in the state of Texas and Hunt County specifically. And we have a constitutional requirement to appraise property at 100% of its market value. And these appraisal notices that are going out today, folks are going to see extremely large increases in their appraisals over last year. And so we wanted to get out ahead of that and explain to people what's about to happen, what they can do about it and how it can potentially impact them as far as their property tax goes.
I will tell you that county-wide the average home value is up this year by 20%. The average home value in Hunt County right now is $215,000. The median sales price of a home in Hunt County from this year compared to last year is up 29%. The median sale price of a home in Hunt County, as of January 1 is $275,000. What's really interesting to me is the sale price as a percentage of the original list price. Historically, when you go to list your home, you'll get with a realtor, they'll tell you, "let's list it at $X and hope we get 90-95% of the list price." Those days are gone, people are getting 100% or better of their original list price. People are getting into bidding wars over homes. We're seeing a lot of cash buyers. And so those homes that are going on the market, they're selling for what people are asking for. And it's our job to report what's happening in the market. Again, we had that constitutional requirement to be at 100% of market value.
And you mentioned in your opening, that's good for people who are wanting to sell their homes. But for those who have no interest in selling, and they're going to stay put, what does that mean, as far as property taxes go? And I get that question a lot. You know, I don't plan on selling my home, you know, how is it fair that my value goes up on the appraisal roll when I have no intentions of selling? And that's a fair question. The answer to that is the property tax and the property tax appraisal, the process that we use, is if you were going to sell your home, what would it sell for on the open market? I had a gentleman the other night asked the question, "Well, I know that there's been a lot of people in my neighborhood who have moved in from out of state with a lot of money, and they're paying ridiculous prices for homes. But I don't think my house is worth that." And the question is okay, if you knew that you had five neighbors that just sold their home for $250,000, and you were going to put your house on the market based on those sales, what would you list your house for? And what would you expect to sell it for? Well, probably $250,000. Even though in your mind, you bought it five years ago for 150,000. You're going to sell it for what the current market rate is. And that's what we have to appraise those properties at: what it would sell for on January 1 in the current market based on sales comparisons of like homes around you.
Haslett: Is there a self-regulating dynamic in this? In other words, does the appraisal system have a purely reactive relationship to real estate market? Or do the appraisal systems in some way, either intentionally or unintentionally, influence these market prices?
South: No, we are very reactionary to the market. So we follow the market trends. We know what homes are selling for, what buyers and sellers are willing to pay for these houses, and we just report what's happening in the market. I don't think that our appraisals have any impact on what actually happens for buyers and sellers. We lag in the market. So for the 2022 reappraisal year, we use sales that occurred during the year of 2021. So we're using typically about 12 months’ worth of sales in the arrears, to set the appraisals for January one at the current tax year.
Haslett: So, how does the process work? Because I'm sure the methodology, just like everything else, changes with advances in technology. Y'all have software that you can use to do things that people used to have to do manually. So I understand that this is a very complicated process, but if you could just kind of give the shorthand version, start to finish, how do you appraise a property? What's the process look like?
South: Sure, we use a technique called, "mass appraisal." And so it's, it's quite different from when you go to buy a home or refinance your home, you'll hire a fee appraiser who will come out and do a complete, thorough inspection of your home. Well, we've got over 70,000 properties in Hunt County that we have to reappraise annually, so we don't have the luxury of doing that type of thorough inspection. So in a mass appraisal system, the first thing that we do is we collect data on each and every property in Hunt County. So you'll see our appraisers out in the field during the year. They're collecting data, they're looking at the age of the homes, the square footage, the condition, the quality of construction, and then picking up any amenities that are on the property like swimming pools, or barns or outbuildings.
Once we have all that data compiled and have it into our system, then we build cost schedules: we talk to local builders, we find out how much it costs to construct certain types of homes based on the size and condition and quality. And then we run it out and put a depreciation factor on it based on the age. Then we gather actual sales information: sales that have occurred that we can confirm what the sale price was. We break the county down into market areas, because there's the three key factors to real estate: Location, location, location. We all know that two similar homes that are identical, one in Caddo Mills versus another home in Commerce, Texas, even though they're identical in every way, they're going to have different sale prices because of the location. So we break the county into market areas. And we start testing our models against actual sales of homes in those market areas. And then we calibrate those models based on the location and the market area that we have identified.
And so what happens at the end of the day, we have a universe of properties countywide that are on a single cost schedule, but there's going to be modifiers based on where they're located within the county. So, let's take for example, a neighborhood of 200 homes. And within that neighborhood, if we have confirmed sales prices on 20 homes, 10%, we can test our cost schedule against the actual sale prices of those 20 homes. And if, on average, we're sitting at 85% of market value, then we know for the entire subdivision of 200 homes were about 15% below what homes are selling for. So we'll put a 15% adjustment factor on that neighborhood to rise everyone to market value, we can't just go out and select those 20 homes that we know have sold and only raise those. We raise everyone's value based on those 20 comparable sales.
Haslett: So, in a way, you're almost like stenographers, courtroom reporters, journalists, maybe? You are recording external data. Basically, you have a system where you take data of things that are going on, and you take that data and you turn it into an appraisal. So, what recourse would somebody have from another public entity to protect themselves against property taxes that they couldn't afford? For example, take for - just so we can be non-controversial- let's take an out-of-state example. Let's say something that happened in Santa Fe, New Mexico in recent decades where it became a very popular city with lots of rich people. Lots of wealthy people moved to their property values went way up. And you had these families that had been there for, in some cases, many, many generations, in some cases, even before the US showed up in that part of the world who suddenly couldn't afford to stay there. So what public agencies can people turn to as far as affecting policy to insulate folks against these types of increases?
South: Sure. Well, there's really two levels to that. There's the state, the state legislature, who creates the property tax policy statewide. And then there's your local government who actually sets the tax rates that determine how much you pay in property taxes. And the way that the system is designed, and the way the system should work: As values increase, for a taxing unit to stay revenue-neutral, they should lower their tax rates. So if you had a billion dollars’ worth of taxable value on the roll last year, and now you have a billion and a half on the tax roll in the current year, the tax rate would have to come down to offset the increase in values.
And so the local government, your locally elected officials, when they adopt those tax rates, they have to look at that and determine what are our revenue needs, and what rate do we need to set based on these increases in appraised values to generate the revenue to operate and function local government? There are some protections in place that come from the state level. Two years ago, or two legislative sessions ago, the legislature enacted a bill that said that a taxing unit, a city or a county, cannot increase their revenue by more than three and a half percent year-over-year without taking it to the voters for approval. So if they want to go above a three and a half percent increase in revenue, they have to go out to the public on a ballot election and ask them for that additional increase above and beyond three and a half percent.
Haslett: And we also have some freezes for seniors. It's my understanding that school districts in the state of Texas, statewide, they have in place, currently, a freeze on property tax, or increases for homestead properties only for folks 65 years of age or older.
South: That's correct. So if you are 65 years or older, on your homestead property, for your school taxes, it is state mandate that your taxes are frozen. So the amount of taxes that you pay to the school district the year you turn 65, regardless of what the tax rate does, and regardless of what the appraised value does, the amount you pay will not change unless you make major improvements to your home. If you add on to it or add a swimming pool or do some type of improvement like that it's going to increase. But if your home stays the same, regardless of the rate or the value, the amount of taxes you pay, will not increase. Now other taxing entities such as the County, cities, the hospital district, special districts, they have a local option to implement the 'over 65' freeze. We do have a handful of cities within Hunt County that have an 'over 65' freeze. The City of Greenville, for example, just last year had a ballot initiative to implement the 'over 65' freeze. And so those are available for other local government entities as well if they choose to do so.
Haslett: Now, coincidentally, tomorrow morning, I read in the Herald-Banner, early this morning, when I rolled in here, the Herald-Banner said that there's going to be a special meeting of the Hunt County Commissioners Court on Wednesday at 10. And one of the county commissioners has said he's going to present a proposal for a county-wide senior tax freeze. So that would incorporate, I mean, that would include folks who live in unincorporated areas, and folks who live in municipalities such as Commerce, where we don't currently have in place, this senior tax freeze.
South: So the county senior tax freeze would impact the taxes that you pay to the county itself.
Haslett: Right.
South: And so if you are in the City of Commerce, if you live within the City of Commerce, you pay taxes to four taxing units.
Haslett: Okay.
South: The school district, the city, the county and the hospital. As we mentioned earlier, school taxes are frozen by state mandate. The county if they chose to give the 'over 65,' the school tax or the taxes that you pay to the county itself would be frozen. And really that's a policy decision that each taxing unit has to consider and take into you know, several different factors when they consider whether or not they want to grant that freeze. But yes, it's my understanding, as well, that the county is going to discuss that. Whether or not they should do it, that's not my business. That's for Commissioners Court to decide or ultimately for the voters of Hunt County to decide.
Haslett: Right, the appraisal district is supposed to stay out of policy decisions.
South: We appraise property, that's it, Mark.
Haslett: Okay. Don't shoot the messenger.
South: That's right.
Haslett: Okay. What are some other concerns or questions, perhaps not concerns, but just questions that folks have had at some of these recent meetings where you've gone around the county answering people's questions about the process?
South: Sure. One of the big things that I like to make sure people are aware of is on your primary residence: Make sure you have your homestead exemption. There's really two benefits to the homestead exemption number one, it gives you a mandatory $25,000 exemption off of the appraised value. So for example, if your home is appraised at $100,000, if it's your homestead and you've applied for the homestead exemption, the taxable value will only be $75,000 for school tax purposes.
Now, there is an election coming up in May on May 7, and there's a proposition on the ballot to increase the mandatory ISD homestead exemption from the current $25,000 up to $40,000. So if people want to get out and give themselves a little bit more of tax relief, they should go vote and vote in favor of that proposition to increase the homestead exemption to $40,000. The other benefit of the homestead exemption, and this is - we've had a lot of questions on this because it's a little bit confusing. The other benefit to the homestead exemption is it puts in place a 10% cap on the taxable value of your homestead property from year-over-year. The appraised value - the market value will go up to whatever market value is, but the taxable value is capped at a 10% increase.
Again, let's go back to the example of the property that's valued at $100,000. If it was $100,000 last year, we reappraise it this year and it's now $150,000 market value, your taxable value will be capped at $110,000. Because of that homestead 10% cap limitation. Now, each year after that it will go up another 10% until the taxable value catches up with the market value. But that is a significant benefit to homeowners to where they don't see the full brunt of the real estate markets increasing all in one year. So again, if it's your primary residence, if you have not applied for the homestead exemption, please do so - that gives you some additional protection. You can contact our office, if you don't know if you have the homestead or not give us a call. We can look up your property or you can go to our website, Hunt-CAD.org to see if you have the homestead exemption. And if you don't I encourage everyone to make the application and get that homestead exemption.
Haslett: Are there any cases of people, and I'm speaking generally, I'm not speaking specifically about hunt County, but just speaking generally - Are there any instances of people trying to be weaselly with this homestead exemption, and you have people who own multiple properties, and they're trying to claim a homestead exemption on a property where they don't really live? What sort of checks and balances are in place to prevent that kind of fraud?
South: You know, I think that - I'm certain there are property owners who have multiple homestead exemptions out there. And whether it's by - intentionally or not, I don't know. But there are certain checks and balances in place we do. Whenever we receive a homestead application, there is a question on the application itself that asks, "Do you currently have a homestead exemption somewhere else?" We hope that people are honest and they answer that correctly. And if so then then we contact that other appraisal district and say, Hey, we've received this application, have y'all removed it from your system before we put it into our system?
Haslett: But that's something that you would do manually? There's no sort of automated, you know, it's it's not like when a policeman runs somebody's driver's license to make sure there's nothing else they need to know about. It's something that must be done manually.
South: That's correct. That's correct.
Haslett: Okay. We're visiting with Brent South of the Hunt County Appraisal District. He's the chief appraiser. And these new property tax notices are being mailed today. So folks can expect those to show up this week. And are you braced for lots of questions and concerns? If folks get their notice in the mail, and they're just - their head explodes and they have some questions, what should they do? What's the process? How did they get these questions answered?
South: Sure. When you receive your appraisal notice, on the back of the appraisal notice is a protest form. You have until May 19, to file a formal protest with our office. We do encourage everyone to look at those appraisal notices and ask yourself the question, is my property worth this much? If the answer to that question in your mind is, "No, it's not," then you need to contact our office, file a protest, schedule an appointment to come talk to one of our appraisers.
The first step in the process is to sit down with one of our appraisers face-to-face and talk about the value of your property - how we came up with the value of your property. Ask to see the sales comparisons that we use to value your property. If there are things about your property that we're not aware of, that we need to be aware of, that would decrease the value, bring evidence of that. Bring pictures, bring repair estimates, bring anything that you can provide that helps our appraisers understand why your property does not fit the model that we've developed for your area. Because we have sales - I mean we have so - the amount of sales information that we have this year, it's more information than we've ever had. So more than likely, when you come in, we're going to be able to show you sales comparisons that justify the value for your property.
But it's up to the property owners to help us understand if your property is different for some reason than those that we're comparing it to. Because in the mass appraisal system that we mentioned earlier, we only see half of the property. We only see the outside of your home. We don't know what's on the inside, we don't know the condition of your house on the inside. We don't know if there's foundation problems. We don't know if you need a complete remodel of your home. We just don't know that. And so we're asking property owners to help us. And the best way to help us is to file that protest, schedule an appointment to meet with one of our appraisers and bring evidence at your meeting of why your property doesn't fit the model that we've developed.
Haslett: And I imagine the next few months are going to be involving lots of review.
South: We anticipate a record number of protests this year. And again, because the values are going up so drastically this year. But I do want to remind everyone that it's not our job to increase values to help the taxing units get more revenue. We really are not in the tax business. A lot of people equate property taxes with the appraisal district. But our job is simply to appraise property at market value each and every year. And so, because of the fact that if values go up and rates don't come down accordingly, property taxes do go up, people equate higher values with higher property taxes.
But I will say the one thing you cannot protest at the appraisal district is the amount of taxes that you pay. We don't know what your taxes are going to be, because the tax rates have not been set by the taxing units yet. So if you want to file a protest, because you disagree with the amount of taxes or you think your taxes are too high, the appraisal district is not the right place to do that. If you come in and say I'm here because I can't pay the property taxes, they're just too high. We're going to have to tell you, "Then you need to go talk to your elected officials, you need to go to Commissioner's court, you need to go to the school board meetings, you need to go to city council meetings. They're the ones who set the tax rates. If you're here because you think the value that we've appraised your property at is too high. We'll talk to you all day long. But when it comes to taxes, the appraisal district is not the right place to go talk."
Haslett: I think that's a pretty comprehensible differentiation. I'm with you. I followed. We're visiting with Brent South of the Hunt County Appraisal District. We chose to run a little bit long today. We're going to join NewsHour from the BBC World Service in progress, oh, in about three or so minutes. We're going to run up to 9:36 a.m. with this program. It's the beauty of live radio, we can do whatever we want. And being that we have a couple of minutes left, I'd like to leave it open ended for you. Is there anything that we haven't hit on yet that is something that came up at some of these recent public meetings that you'd like to like to mention?
South: Sure. One thing that you'll notice that's different on your appraisal notice this year is the estimate of taxes will no longer be on the appraisal notice. In years past when you got the notice it showed you what the new appraised value was, and then what your estimated taxes were, based on that new appraisal using last year's tax rate. Well, the Texas Legislature recognized that that was a little bit misleading, because it was based off of last year's tax rates. So they have removed that estimate of taxes off of the appraisal notice, but in place, they have required that each county create a website, a tax rate website, and in Hunt County, that website is hunt.countytaxrates.com. So in August, whenever the taxing units are actually adopting their tax rates, people can go to this new website, and they can pull up their individual property and they can see every taxing unit that levies a property tax on their property. They can see what their proposed tax rate is and if that proposed tax rate is actually going to be a tax increase or not. Each unit is required to post their date, time and location of their public hearings to adopt their tax rates so property owners can see when those hearings occur, and if they want to show up at those hearings. And then, they also have a mechanism on the website where they can communicate electronically through the website with their elected officials on how they feel about their proposed tax rate and proposed tax increase.
Haslett: We've been visiting with Brent South from the Hunt County Appraisal District and this is 88.9 KETR.
