One of the ongoing services I offer my clients is assistance every year with market information needed to protest proposed new tax values. This year there have been some very obvious protests, and some new appraisals that were reasonably in tune with actual market value. One, however, provided a great example of how widely values can vary within a single market area.
The request for help came from a client who owns an unimproved 1.8 acre lot in the hill country around Lake Travis, northwest of Austin. Here’s a very brief summary of how that market analysis worked out:
First, for a look at the “big picture” I reviewed a full year’s history of market activity involving unimproved lots 1 to 3 acres in size in the market area. It is worth knowing that this is a horrible time to be a seller of this kind of property in that area: There are 221 active listings today. Between April 1, 2010 and March 31, 2011 there were 27 sales. [That’s the relevant period for considering tax value, not the period I would use for a current market analysis.] At that pace, existing inventory will last more than 98 months — 8 years! Obviously, that’s a sign that in most cases sellers are not negotiating from strength.
As a starting point of reference, those 27 properties sold for an average of $107,493 per acre after 222 days on the market.
12 of those sales were waterfront lots. Eliminating those reduces the count to 15 sales at an average of $40,107 per acre.
Eliminating 8 “view” lots (Lake/River, Creek, Pond, or Panoramic views) gets us down to 7 sales over the twelve month period. Their average sale price was $13,623 per acre. They were on the market for an average of 274 days! Now, to be fair, I added the criterion that the land require site-built homes. That left 6 sales and an average sale price of $14,615 per acre.
Finally, I eliminated lots in gated communities. That left 3 sales in twelve months ranging from $10,495 to $17,699 per acre, with an average of $12,839. The closest of those properties to the “subject property” was the lowest sale of the three.
Based on this market data, I suggested that the property in question is properly valued at a maximum of $25,000.
In that very simple summary, this looks extremely straight-forward doesn’t it? And all those steps to narrow the sample down to lots that are most comparable to my client’s property seem completely obvious. I agree. The result was a reduction in the average value of “similar” lots from $107,493 per acre to $12, 839 — almost 90% difference!
Now the punchline: The appraisal district’s proposed valuation of the “subject property” is almost $55,000 — more than twice what the market data indicates is accurate.
I am not writing this to take a shot at the appraisal district. Texas is a “non-disclosure” state, meaning that these public appraisers don’t have access to MLS sales data, except when property owners bring it to them during the protest process. Instead, they use mass appraisal techniques. That can be problematic enough when dealing with residential properties in fairly busy market areas, but slow-moving land is a real challenge.
Instead, the real point of this post is the HUGE contrasts in value that resulted from each search refinement described above. It is ALWAYS worth asking about actual property value, and protesting tax valuation when needed. More importantly, don’t assume that what you “hear” about sales of land “like” yours is actually a fair comparison.
The best way to get accurate market value is from a professional — a REALTOR® or a licensed third-party appraiser. Whether you’re buying or selling, price consultation is a vitally important part of my service to my clients. I’ll be happy to discuss your situation when the time is right for you.