Market Value Appeals: Proving Your Property Is Overvalued

What “Market Value” Means Under Texas Law

Market value is the price a property would bring if it were offered for sale on the open market for a reasonable time, with a buyer and seller who both know its uses and limits and neither is forced to act. The date is always January 1 of the tax year.

Appraisal districts value hundreds of thousands of properties at once, using models built from averages. Texas law still requires them to consider the individual characteristics that affect each property’s value (Tax Code Section 23.01). The gap between the model and your actual property is where most market value appeals are won.

At the protest hearing, the appraisal district carries the burden of establishing the value it set.

Three Ways to Show the Value Is Too High

Comparable sales. Sales of similar properties near January 1, adjusted for differences in size, age, condition, and location. We also examine the sales the district relies on. A sale that isn’t truly comparable, or wasn’t adjusted, is often the weakest part of the district’s case.

The income approach. For income-producing property, value follows income. We normalize the property’s actual income and expenses, test the vacancy and expense assumptions in the district’s model, and support a capitalization rate with market evidence. A small change in the cap rate or the vacancy assumption moves the value a long way.

How the income approach works

Condition and obsolescence. Deferred maintenance, functional problems, environmental issues, easements, and access limits all reduce value. Districts rarely see them from their records. We document them with photos, repair estimates, inspection reports, and surveys.

Common Errors in the District’s Value

• Market rents assumed where the property actually rents below market
• Vacancy and collection loss set below what the property and its submarket actually experience
• Operating expenses too low, or reserves, leasing commissions, and tenant improvements left out
• A capitalization rate that doesn’t reflect the property’s age, class, or risk
• Comparable sales from a stronger location or a newer class of building
• Wrong building class, construction type, size, or use code in the district’s records
• Easements, flood plain, or access limits that the record doesn’t show

How a Market Value Appeal Runs

1. We file the protest by the deadline, on market value and, where the evidence supports it, unequal appraisal.
2. We build our opinion of value before the first meeting.
3. We request the district’s evidence and review how it reached its number.
4. We negotiate at the informal meeting. Many market value cases settle here.
5. We present at the ARB hearing if the informal offer isn’t supported by the evidence.
6. After the ARB, we’ll tell you whether binding arbitration or litigation is worth pursuing.

What to Have Ready

For income-producing property: rent roll, operating statements for the last two or three years and the trailing 12 months, and any recent appraisal. For any property: purchase price and date if bought recently, and records of repairs, damage, or problems as of January 1.

Your financial information stays confidential. We use it only where it strengthens your case.

This guide is general information about the Texas Property Tax Code, not legal advice. Deadlines and rules can change with each legislative session.