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How we saved $2,000 in less than an hour

May 29, 2011

We had great success challenging property taxes on Friday afternoon. We purchased 2 properties late last year and challenged both of these as well as our primary. Our results exceeded our expectations. All 3 of these were in the Dallas County Appraisal District office.

The city should send you their estimate of your tax assessed value for a given year in May or June. Note: My girlfriend did not get one of her assessed value notifications. She called the city and they informed us they don’t send out the notices if your tax value went down. We had to print the form off from the web and mail it in to challenge that one. This is just part of the reason only 1% of people challenge their tax appraisals.

If you wish to challenge you will need to complete the form and mail it back to the Appraisal office. They will then send you an ‘Appraisal Review Board (ARB) Hearing Notification’. This will include a date and time for a formal hearing, but will also include instructions for an informal hearing. I always use the informal route and have never needed to challenge beyond that. We brought several supporting documents to challenge our appraisal amounts:

  • HUD-1 closing statement showing our purchase amount for the properties. This is your most powerful tool. This is what you just paid for the actual subject property. The County is looking to be sure your purchase was an ‘arm’s length transaction’. They will also identify it as a distressed property as they can see the previous owner and it’s on your HUD-1. Our two were bank properties so we told them they needed minimal repairs. I told my appraiser that yes it was an REO property, but that it was in good condition and I only put some paint and carpet in it.
  • Pictures of our properties (inside and out). Since our two properties were Bank owned, I took pictures. Bring about 8-10 pics of the inside and out. I always show before pictures that show it a bit rough, but not a total dump. The idea is that despite it being a distressed property it was in good condition and my purchase price + repairs represents market value for the house.
  • Repair receipts for any repairs you have made to your properties. When you tell them you purchased it from the bank and only made cosmetic repairs, they might ask for receipts that back up your story. You want to keep the value low, so you want them to understand you put very little money into the house and the total value should be near your purchase price + improvements.
  • Comps. Sales seem to come in all over the place with foreclosure and retail homes showing up in the comps. Just show the story you want to tell. If you are on your first challenge after your initial purchase your HUD-1 should be your primary ammo. We did not use comps for our two rental properties as we had HUD-1 statements and our purchase amounts were below any comps. If comps are not coming in this low, then don’t show your comps.

This should be all you need. Bring extra copies that you can give to the assessor as they will need for their records. You need to go in with a plan. Be ready for them to ask you, “What do you think your property should be valued at?” Be prepared with an amount and a story to go with it. Then sit back and be quiet. Should be a nice long silence and then they will come back with an amount. They will then ask you if you agree with the reduction or do you still want your formal hearing? I have always been happy with the informal hearing amount.

Below are our results from challenging our taxes this year. We reduced our tax assessed values by over $80k. This resulted in quite a nice savings and it really made an impact on the annual returns of our two rentals. Remember the savings are not just for the current year, but your taxes from then on will only go up gradually from here.

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