How Do You Get on HCAD’s ‘Cheap’ List?

HCAD Econ Misimprovement ClassificationA reader whose new property tax assessment is feeling pressure from all the construction nearby in Brooke Smith writes in with questions about HCAD’s “economic misimprovement” classification. That’s the label HCAD often applies to older houses in neighborhoods where similar structures are being torn down and replaced with new construction. (It’s “an adjustment to the dwelling to limit the remaining building value as the land value increases.”) Writes the homeowner: “I was wondering if my fellow co-readers would have any information about filing your home as an economic misimprovement and how to do so with HCAD. Also, are there any disadvantages of doing so?”

Some background: “I bought my home in 2012; my property taxes from 2011–2012 increased by 40 percent. I prepared a thorough protest, but the ARB essentially denied my protest by comparing my home to the new homes/heavily remodeled homes in the neighborhood.”



I live in an old home. There is a remodel on file with HCAD in 2008 where the previous homeowners updated the kitchen and converted the floorplan from 3BR to 2. Other than that, the home is still the same as it was 11 years ago.

Yesterday, I received my appraisal letter, and if it weren’t for the fact that my account was capped this year, they would’ve attempted to raise my taxes by 29 percent. The value of the land went up by $50K, and the value of the home about $2K.

My neighborhood is gentrifying at a rather alarming rate, but my home is nowhere near the $400-$600K homes that are being built or heavily remodeled. Tear me downs are going for $220-250K, and if I were to sell, my home would most likely be bulldozed or immediately humperlowed.

Image: sevfiv

Exceptions Misimprove the Rule

36 Comment

  • Room total = 9, are we counting closets as rooms? Seriously though this is interesting, but how much does it cap the value of a home. If the home is 26k and the properties going up around it are 250+, how much can you really cap that type of home.

  • Rule #1: Never apply for permits on a re-model. (Easier to do if you’re not within the doughnut run distance of the prius patrol.)

  • We share your pain. Dealing with the initial HCAD evaluator and their complicated system is bad enough. Our one experience with the ARB was very negative. The board members were extremely rude, especially when we showed data that contradicted their data and was indeed more accurate in reflecting our property’s value. Needless to say, we received no reduction.

    While it’s too late for a legitimate, licensed appraiser to evaluate your property for 2013, it might help to spend the money late next year. And, I really don’t know whether or not that would work. Possibly someone on Swamplot has done this.

    Homeowners continue to bend over and subsidize commercial buildings that are evaluated at extremely low rates. The excuse being, gee there aren’t enough comparable sales. Baloney. It’s the golden rule-those who have the gold make the rules.

  • Same thing here. I live in Braeswood Heights in a 1950’s home. We remodeled after being flooded in Tropical Storm Allison. Before the remodel the house kept loosing value while the land increased. To the point where our house was worth $1000 while the property was worth $200,000+. This was a HUGE problem for us when we remodeled/rebuilt due to the flood. FEMA required that the improvements to the house could not equal less than half the value of the house (something like that) and of course while we were being given $100,000 to repair the house, our house was only “valued” at $1000.

  • We had nearly the same run-in with ARB as Darby Mom. They even admitted they screwed up our homestead exemption, but refused to go back and fix it. We also made the mistake Commonsense or permiting a remodel. We needed to make it official that we got the K&T out of the house. Remaining remodels will be more discrete.

    Out big issue is we are on a block of not tear downs in a sea of teardowns. Our deed restriction is such that it has to be brick and it can’t be more than 24ft tall. Add to that setback, etc and nobody is tearing down on our streets. But our land value keeps climbing like rest of 77005 (not West U). We got our improvements down to $2k, but I fear the $/sf for land that there is no fighting.

    Last rant, it’s BS that the city can raise the value of your home and the improvement value based on an outside driveby view. Yeah we did some yard work and improved the view from the street. but how about you come inside and see all the busted ass stuff in here before you call my condition “Good”. Physical condition – Good, Will the $20K estimate for foundation repair this year offset that?

  • @MH005 – You can appeal that your structure is over valued by proving it to the ARB. Get an inspection report and take it to the ARB meeting, then get some estimates to do the work that is needed to repair the deficiencies.

    If you had a $20,000 foundation problem that you fixed, you might want to keep that quiet…b/c it is fixed now. You could have used the unfixed problem as a reason to reduce your taxes, but once fixed, its market value again.

    I would pay most attention to bed/bath counts, and square footage b/c that is what really matters…they currently have my house listed as pending, but it somehow miraculously grew over 1,300sqft. That would be pretty awesome if it were possible, but alas, it is not.

  • I have a late 1940’s home with a remodel date that is older than yours. I’ve done several DIY protests – always bringing numbers, always getting a modest reduction for my time. Most recent was the most successful though. In addition to numbers I brought good quality photos of my house (e.g. kitchen, bathrooms, etc.) to show why my place is not comparable to new construction/remodels in my neighborhood. Pictures plus good luck of the draw on the County Appraiser attending the ARB resulted in a short meeting and a big reduction to the the Improvement value. Did not get to an “economic misimprovement” classification but got a valuation with the same practical effect. Might be worth your time to try again. Because of the cap, a significant value reduction yields several years of tax benefit .

  • These adjustments are gold if you can get them. One of the houses in our neighborhood was listed as economic misimprovement (“econ misimp”) for no apparent reason – it was semi-recent construction, and the structure was valued about the same as the lot. HCAD has since corrected that, but the homeowners must have gotten a substantial discount off their property taxes for several years. I wonder who they greased to get that adjustment?

    Also, there may be a way to have the failing foundation reflected in your home’s taxable value. But be careful what you wish for. When we were shopping for our first house in Houston ( a remodeled 50’s ranch in Woodside subdivision), the seller did not disclose any problems with the foundation and there were no signs of any foundation repair having been done. When I checked the HCAD records, it had the notation “cracked slab”, so we nixed the deal.

    Our Realtard’s response? “Gee, I never thought to check!” Gotta love used house salesmen. But what the hell, it’s not their money at risk if you buy a house with a major defect, right?

  • Amen, Darby Mom: “Homeowners continue to bend over and subsidize commercial buildings that are evaluated at extremely low rates. The excuse being, gee there aren’t enough comparable sales. Baloney. It’s the golden rule-those who have the gold make the rules.” Amen! I am happy to pay my fair share of taxes, it’s infuriating that the rich landowners (i.e., the businesses and large churches) don’t.

  • I thought year to year property tax increases are capped at 10%?

  • Living west of Reliant, the market value of my tear-down went up 30%, which includes a 12% increase for ‘improvements’. Perhaps the appraiser thought my inland sea oats were especially handsome last summer. I’ve not replaced my front window (it needs replacing and I can afford it) to avoid the attentions of the tax man, to no avail. But a friend in the Heights has a tiny tear-down with a new market value 47% above last year. The bigger the bubble, the louder the pop.

  • For us we managed to get our improvements value down to $2k last year. So less than half a percent of our value is the house, so nothing left to argue, since HCAD is pretty hard to argue down on land value.

  • Had a rather unpleasant protest experience a couple years back–don’t want to go through that again. Bought a not-so-new anymore house (in an area of rapid redevelopment) that needed some work & TLC. Decided to protest. Did the appraisal go down? No, they INCREASED it–significantly. Managed to get it back down to the original with more fighting, but honestly, who wants to protest for a full year year-in & year-out–other than big companies with property lawyers on retainer?

  • Not to defend “commercial guys” but commercial buildings are also host to a group of taxes that residential owners don’t pay. Extra drainage fees. Management district fees, etc. Also note that commercial taxes are simply paid by those renting that space. Be they small businesses via NNN leases or renters of housing. So raising axes on “commercial” may not have the desired effect.
    Commercial property owners are not a monolithic block of 1%’ers in top hats and monocles who look like the monopoly man.

  • > While it’s too late for a legitimate, licensed appraiser to evaluate your property for 2013,
    > it might help to spend the money late next year. And, I really don’t know whether or not
    > that would work. Possibly someone on Swamplot has done this.

    I have done this and it didn’t really help. In 2013 I had TWO 3rd party appraisals done that established the market value well below HCAD’s value. I figured the tax appeal would be easy since I had great documentary evidence, but boy was I wrong. The ARB admitted their initial number was pure fantasy, but instead of actually taking my appraisals into consideration they took the Solomonic route and set the value halfway between their fantasy number and my supported number and hoped I’d go away. No dice, I filed an arbitration demand, and they continued to fight. In front of the arbitrator they again admitted the ARB value was too high, but still fought for more than my appraisals showed. In the end the arbitrator saw it my way mostly, awarding me 2/3rds of the disputed amount.

    And as I look at my HCAD account today, they still haven’t fixed 2013 (they have until the end of the week to comply with the arbitrator’s 30-day order),. and 2014 is in and through the roof again. A repeat of last year’s fight is a waste of my time, so I’m throwing in the towel and hiring a service. Which pisses me off because the protest service and IRS reap the lion’s share from going that route, but that’s a whole ‘nother rant…

  • Also as to commercial/industrial taxes…most homeowners do not know that in addition to property taxes on real property (real-estate) that commercial/industry also pay Personal Property Taxes – that includes phones, desks, chairs, computers, printers, machinery, etc…..

    I know for the company I work for, our personal property bill is 15-18x our real property bill. We are capital equipment intensive manufacturing and pay through the nose for the privilege of purchasing and using the inside of the buildings we own. They tax everything, including inventory.

  • @TXdesign, market value may increase >10% a year, but the appraised value will be capped at 10% per year. My understanding is that if it’s an investment property, though, that the appraised value will not be capped at 10%. Regardless, 10% is still a big increase, especially when it happens year to year. My home’s market value went up 16.5% this year. I’m not very confident that fighting this will be worth my while this year.

  • I am a real estate appraiser and do a lot of property tax work. The lie that commercial buildings are getting away with murder and the residential owner is getting screwed just comes out of ignorance of how the system works. A property is valued based on the property value as of January 1st of that year. There is a difference between the value of the bricks and sticks of a building and the investment value of the leases in that building. Long story short you can appraise a building leased fee (investment value) or fee simple (as vacant or owner owned value). Under our tax code we value buildings fee simple. And for good reason. You could have identical office buildings getting identical rents, but have grossly different market or leased fee value based on future step ups in rental rates of the credit worthiness of the tenant. This investment value is intangible and by law is not taxable. It is easier to determine the market value of a home because it has less intangible value. What you consider unfair would be the equivalent of looking at what homes rent for in your area and capitalizing the income a rent house could generate to determine value. This would be much more than the market value for homes in most neighborhood. I would also like to add that homeowners get a homestead exemption of 20% for most taxing jurisdictions that commercial properties do not get.

  • Passive Aggressive Bike,

    I have bad news for you. Most residential property tax consultants will have worse results than you did.

  • Hire an attorney. There are attorneys out there who specialize in this type of thing and they only get paid if they lower your tax bill – they typically take half of the reduction. We did it this past year and it was fantastic – we didn’t spend any of our valuable time arguing with people who don’t listen to facts (but they do listen to lawyers), we got a reduction and it was a reasonable cost to us. We will be doing it every year going forward.

  • My experience was positive. Armed with facts and photographs of the condition of my home (it was an unquestionable dump in a hot neighborhood) with data showing the four other town homes built at the
    concurrently were wildly varying in price and leaving out any emotion, pleading, brown nosing etc…., I
    managed to get a substantial adjustment. My values are pending this year, it is now a semi dump and I’m
    not sure I can go back to that well again with selling prices 25% over last year.

  • HCAD is benefitting by upwardly appraising ALL residential property in Harris County. The whole system is rigged and ALL of the special interests work in sync to benefit from higher property values…BTW , I’m going to remodel the home I’m in and the tax are CAPPED.So HCAD can suck it !!!

  • Based on the comments here: HCAD is the tax NAZIS !!!!

  • @Fernando, I agree 10% is a big increase year to year but the OP claimed a 40% increase in one year.

  • @TXdesign,

    OP bought his house in 2012, and he’s remarking that the taxes went up 40% from 2011 to 2012. Taxes are not capped between different owners. 2012 appraisal was probably closer to what OP paid for the property.

  • Westbury. Our home was given a 31% (market price) increase this year per HCAD. Zillow shows ~10% average increase for neighborhood. I’ve disputed 3 out of 4 years we have been in the house. Generally a positive experience, but the city continually uses the wrong comps for the initial appraisal. Very aggressive. I am surprised.

  • @Brinn – make sure you factor in the income tax differential as well. Assuming you itemize deductions, that property tax savings will effectively be taxed at your marginal rate. That’s going to be in the 25-40% range for most folks posing here. So your net benefit is only in the 10-25% range after you pay the lawyer. Maybe you still think that’s worth it to not have to deal with it, but I suspect many folks who hire these contingent-fee guys don’t understand how little of the savings they end up with.

  • Can comments be numbered? It would be helpful to pickup where I left off>

  • I’m new to this stuff and I’m looking for free advice. I bought a totally renovated 1940’s house at the end of 2013…. The total appraised value was less than 100k in 2013. The new 2014 market/appraised value is nearly 350k. Keep in mind it was torn down to the studs and basically has new everything in it. I have a few questions:
    1. Does the fact that I recently bought this house work against me in that they can just look up the purchase price and mark it up accordingly? Do they not have to at least keep my market value in line with houses in my neighborhood on sq.ft basis?
    2. When I’m looking around at other houses in my neighorbood which are similar in size/quality, I’m still seeing significantly lower market values. For example, there is a similar sized house in my area built only 3 years ago (which is actually on sale for over 500k). Their market value did not increase at all from 2013 and is value at 270k!
    3. None of the houses on my street had their market value go up one cent from 2013 while houses are being sold for much higher prices than ever before. Why are my neighbors’ values stagnant?
    I’m sure I’m missing something. Please help.

  • @Progg – 1. Completely and yes: HCAD will most likely value your property for the purchase price you paid. They’ll send you a note in the mail asking you for sales information, etc. Don’t fill it out and send it to back to them. They’ll still get their information, but I fail to see why anyone needs to make it easier for them. Unfortunately, I haven’t heard of many “I overpaid” cases going through. HCAD’s website even goes on to talk about how inventory is at an all time low and sales have gone up. (In your case, if your house was remodeled down to the studs, I would say that the value is no longer what it was reappraised as in 2013. The scenario for this homeowner is one that just exchanged hands; no remodeling whatsoever minus that update on HCAD’s books in 2008.)
    2 &3. Some houses don’t see a marked increase unless something noticeable happens in the neighborhood. Additionally, the value shown on HCAD’s website may reflect the automatic 10% capped account adjusted value (your account will be capped once you have a homestead exemption in your name for the previous year and current year). Last year, I saw a huge discrepancy amongst my home and others in the hood and noted this at my protest. Did it matter to HCAD? Nope. This year, I noticed a majority of homes near me went up considerably in “value.” If something is “undervalued,” HCAD will get theirs in the 2014 tax years.
    In regards to the reader’s original question, does anyone know if it’s possible to file your home as an “economic misimprovement,” or is that something that HCAD deems on its own? Or is this property tax season going to be “roll over and take it?” My property protest did not go well last year despite spending 20 hours and doing considerable research. I have zero respect for the ARB given how rude and condescending they are, and this entire “unbiased” review is just BS. If you’re getting paid by HCAD, don’t even tell me that you can be impartial.
    RE: fighting property taxes with one of those lawyer companies: my mother and boss used Connor and Associates in previous years, but last year, they refused their case and said that there was no way in chance they’d “win.” Strangely enough, when I was there to protest my property taxes, a representative for them was being paged, but no one showed up. Sketchy.

  • I have a warning for people that use a residential property tax service (attorney or consultant). They are not taking 40-50% of the tax savings they are taking far more than that. If you read the contract that is issues by the big residential firms they have a formula. They take the reduction in assessed value and multiply it by the tax rate to determine potential tax savings. They then bill 40-50% of that number. The problem is that this does not take into effect your cap or homeowners exemption. In many cases they are taking closer to 80% of the tax savings after exemption and sometime with caps they are billing more than the savings the actual homeowner will see.

  • There is no process to request that a home be considered an economic misimprovement. When a neighborhood has changed to the point that the original homes are no longer the norm, either by new construction or remodeling, HCAD can deem the remaining original homes as econ improvements.

    On to grade – Grade is set when the home is constructed. There is usually a discussion between the builder and the appraisal district as to what level of customization is going into the property as it’s being built. Think of a typical Pulte starter-home as a C+. For every level of better materials or customization, the grade will be increased up to a maximum of X+. This is, for the most part, impossible to change on a permanent basis. Especially after the construction is complete. The key here is to get in either during construction or immediately after. It helps if your home is exactly the same as the rest on the block, but for some reason, your grade is higher. Bring in floor plans and show which houses are similar.

    On to Condition/Desirability/Utility (CDU) – This is the one you can play with. A home with a reasonable amount of un-repaired deferred maintenance should be in Average condition. In the old days, all new homes were put on at Excellent condition, but HCAD has since changed that policy and puts most new homes on in Average condition. This is the one you need to work on with signed written repair estimates and pictures. Every year. Big stuff – electric, plumbing, foundation, windows, storm damage, etc.

    Finally, Level of Remodel – None, partial, extensive, total, new/rebuilt. This causes a great deal of angst to many people, because there is no real written explanation of what each one is, and how long a remodel actually lasts. There are homes from the early 90’s in West U that are still being considered New/Rebuilt, and, as such, are being compared to brand new construction. Additionally, HCAD does not know about every remodel – they only started getting the building permits about 6 years ago. So, your neighbor with the spectacular new kitchen who did it under the table may still be listed as having no remodel. Unless you want to bring in pictures of their kitchen from the last bbq, there’s not much you can do, other than show that yours is in worse shape than HCAD shows. Additionally, many ARB boards and appraisers have different ideas as to what makes a remodel – putting new cabinet doors up in the kitchen? I’ve seen that called a partial remodel. Replacing knob and tube wiring without increasing capacity to avert a possible fire? I’ve seen that called a repair, and not an improvement.

  • @coconutbutter
    Thanks for your response.
    For the record, no, I didn’t fill out their form asking for info. Of course, I wasn’t expecting HCAD to maintain the value of the very low 2013 appraisal but I was under the impression that the new market value would stay in line with market values of similar houses in the neighborhood.
    Regarding your statement “Some houses don’t see a marked increase unless something noticeable happens in the neighborhood.” I’m not sure what you mean but if you are still reading I’d like to understand this better. The HCAD “market values” of the houses on my street are definitely very much undervalued compared to the current market. However there hasn’t been a lot of sales activity….

  • @Progg, still here! Sorry for not being clearer.
    What I meant by my comment is that unless your area has become one of THE places to live where everyone would probably evenly shoulder the pain of a substantial increase, there are going to be many houses that slip through the cracks.
    I guess what I’m trying to say is that there’s no rhyme or reason with HCAD, and you’re at their mercy. Some houses get screwed over, some not as much. At best there is a formula, at worst, it’s random. I’m sure HCAD would say there is some structure to it, but I doubt it. I feel your pain; I really do. That being said, I really wouldn’t worry so much about the market value since those homeowners near you most likely have their accounts capped based off of last year’s appraisal vs actual market value. More info here:
    You can try to protest this, but I’m pretty sure HCAD will tax your value based on sales records from last year. I don’t think they’re being merciful this year to anyone. :/

  • Limestone:
    There used to be numbers but when the new format was implemented several months ago, the numbering system disappeared.

  • I live in Brooke Smith too and also have a small house compared to some of the huge houses being built/rebuilt to the edges of their lots. When I get the funds and time to do all my wish-list improvements I’m hoping that the actual market value of my home will begin to approach what HCAD has decided its appraised value is.