Property Tax Two Step: Why You Should Always Protest and Why You Should Do It Yourself

The content of this blog post will use statistics taken from the Travis Central Appraisal District from the 2014 Property Tax Season. The article containing these statistics was found in the Austin American Statesman on May 9th, 2015.

Two Step-infographicRealValueIQ highly recommends reading the article in addition to this blog post, especially if you own a home in Travis County.

Since 2009, the median home owner property tax bill has increased 50% as of 2014. Then in 2014, the property values increased an average of 11%, again in 2015, and are expected to increase double digits again for 2016.

The problem with analyzing property taxes is that one can often get lost in the numbers and macroeconomic picture and not look at the microeconomic effect of statistics such as the ones that were just laid out.

If we take a home value in 2009 of $300,000 and apply the above statistics, we get a home price that is going to be looking at a proposed value of $554,445 in 2016. Without any reductions received via protesting between 2009 and 2016, this property is looking at an increase in their tax bill of 84%, $7,800 in 2009 and $14,416 in 2016.

Using the median reduction received by residential properties in 2014, and assuming the 77% success rate of protests for homes above $254,000, we can apply reductions in 6 of the 8 years between 2009 and 2016, resulting in a minimum expected value in protesting each year at $1,864, or about $250 per year.

Now there are two radical differences between the property tax world found in Travis County today and pre 2015. The first is that Travis Central Appraisal District allows the majority of homeowners the ability to protest their value online, and RealValueIQ can provide homeowners with the evidence they need to protest their property value using the Travis Central Appraisal District’s online protest option for $49. These two changes have the ultimate effect of eliminating the need for homeowners to hire a property tax professional or property tax consulting firm.

Now we also know there are two basic fee arrangements that consultants historically have charged homeowners for their services: a 50% contingency fee or $150+ flat fee. And we also know that according to the 2014 data collected by Travis County that professionals were only receiving reductions 1% greater than homeowners themselves. Therefore, by estimating reductions received and subtracting consultant fees and the cost of a RealValueIQ report, we can conclude that homeowners can expect a minimum expected value of protesting themselves at around $1,500 after costs, and $930 after consultant costs. This analysis illustrates a positive expected value of around $600 if the homeowner elects to do it themselves over hiring a consultant.

Last, but certainly not least, it is important to remember that this analysis only illustrates the minimum expected value of using RealValue and doing it themselves versus hiring a consultant, as there is a good chance the value of using RealValueIQ will yield a much bigger expected value when either of the following is true:

  • in the event the consultant charges a flat fee in addition to a contingency fee
  • or the extremely probable event that the homeowner receives a larger than median reduction in any of the 8 sample years

In both of these cases the consultant will reduce the actual tax savings realized by the homeowner either in the form of increased cost or increased sharing in the savings via contingency fees.