According to the Associated Press, the City of Austin filed a lawsuit against the Texas state comptroller’s office, arguing that the state’s property appraisal system is unconstitutional because it provides no “equal and uniform” property value taxation.
The lawsuit follows a city petition in June that alleged commercial and vacant property in Travis Count was valued at more than $30 billion below market value.
The suit says the current system routinely allows property values to be set well under market value including for homeowners who can escape otherwise heavy tax burdens.
I think this will be a closely-watched case not just because it could force appraisal districts throughout the state to be more vigilant about tracking sales, but because the suit seeks to force disclosure of actual sales prices for closed property sales. Texas is currently one of the few states which doesn’t require disclosure of property sales prices.
So right now, if you buy an office building or warehouse for $1 million even though it’s assessed by the appraisal district for $800,000, the buyer is under no obligation to disclose the actual purchase price. This could keep the taxes at a lower amount since the taxes are a direct function of the assessed value. If disclosure becomes mandatory, all hopes of keeping taxes low will be gone.
Right now, if the appraisal district sees that a property has sold, I sometimes think they apply a high valuation hoping that the buyer will protest the valuation and provide a copy of their closing statement to prove up that the real value is less than the appraisal district’s guess. I don’t know this for sure, but it seems likely. Mandatory disclosure would eliminate the guessing.
Would mandatory disclosure be fair? Good for everyone? What do you think?
Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.