Harris County Property Values Increase Dramatically Across the Board

By Brian Wolford, Managing Consultant, Houston

The Harris County Appraisal District (HCAD) in Texas has released the new property values for 2014, and many taxpayers may

be wondering why their property’s value increased so dramatically. For commercial property owners, you likely received a

value notice with anywhere from a 15 - 30 percent increase from last year. You can see the breakdown of HCAD’s overall

value increases for 2014, by property type, in Figure 1.

So, why have values increased so drastically this year? The appraisal

district would have you believe it’s due to Houston’s booming

economy, low unemployment, population growth and all-time high

housing demand. But is that the whole story? No one would argue that

the majority of property values have increased over the past few years.

However, it’s probably hard to believe that values have actually gone

up more than 50 percent in the past two years alone. But

unfortunately, this is a very common percentage increase we are seeing

in Harris County.

The reason for the dramatic increase, in short, is “mass appraisal.” HCAD prepares a cap rate study each year to determine

what commercial properties are trading at. Then, they apply this cap rate to all similar properties in the area and notify you of

the new value you will be taxed on. In addition to the likelihood of the computerized information being unreliable and

inaccurate when conducting a mass appraisal, there is another major flaw with this methodology: no two properties are

identical. There are a number of variables that differentiate “similar” properties from one another. For example, the land is

different in terms of location, traffic count, ingress/egress, utilities, drainage, etc. In addition, building structure and designs

differ, as do tenant mixes.

Cap rates also present valuation issues. There might be a similar property to yours that sold at a 6 percent cap rate; however,

you might believe yours could only sell for an 8 percent cap rate. So why the difference? The lower cap rate transaction could

be due to the type of financing used, or lack of financing in general. The new owner could be tax exempt, allowing them to

pay more for the property up front. Or it could be an international investor seeking a safer investment than they can find on

their own soil, so a lower return on their investment is reasonable in their situation.

The unfortunate reality of mass appraisal is most of the values are inaccurate. The only way to get a true market value on

your property is to appeal the value and attend a hearing. The Texas Real Estate Appeal Deadline is June 2nd. We highly

recommend enlisting a property tax professional at this time to review your valuation in order to achieve maximum tax

savings. Here at Paradigm Tax Group, we understand what goes into a purchase price, and the ways market value differs from

an investment value. We know there is more to an acquisition than a one year analysis like Harris County is using. Our team

in Houston has years of experience in providing our unique brand of results-oriented property valuation reviews, appeals,

property tax reductions and status reports to Harris county property owners and managers.

For a complimentary review of your property's market value in comparison to the real estate property tax

valuation you received from your county, please don't hesitate to contact me (281) 569-4730 or

bwolford@paradigmtax.com.

Property Type Total % Value Increase

Apartments 26.4%

Warehouse 11.9%

Office 17.8%

Retail 22.6%

Commercial Land 21.4%

Figure 1 – Harris County Value Increases