by Lauren Courcy

El Paso Inc. staff writer

As thousands of property owners trek to the Central Appraisal District to protest the increased value of their homes, few may know what they’re going up against.
All homeowners have the right to protest an appraisal, but many say the information they need to mount their case is hard to come by.
Adrian Ocegueda, executive assistant to Mayor Joe Wardy, is protesting, through the legislative process, what he calls a lack of transparency at the CAD. He is also protesting the appraisal of his own home, which leapt from $76,000 in 2003 to $90,000 this year.
At a CAD board meeting in June, “we were asking for more transparency in the process,” said Ocegueda. “Given the appeals process, it’s like me giving you snowballs to go into a gunfight.”
The CAD – which operates on a $10 million budget, drawn from 27 taxing entities – wields the power to decide property values, which in turn determine property taxes. Some property owners have seen the value of their homes increase by 20, 40, even 80 percent.
Bob Elliott, of the property tax consulting group Elliott/Smith & Associates, represents homeowners before the CAD’s review board. He says many property owners go into the hearings unaware of the process.
“The CAD sends out little enclosures with all the notices that sort of tell you what to do,” he said. “But if you are not a professional, you are going to get really nervous. It’s a difficult situation. People don’t know the lingo. They don’t understand classifications. In essence, they just don’t understand the process.”
At issue is why property values have risen and how property owners – who feel their homes were unjustifiably overvalued – can successfully protest.

Why the high prices?
Of more than 350,000 properties appraised by the CAD’s 34 appraisers, more than 23,000 owners have submitted protests. That number is typical for government appraisal districts, say professionals. Most mass appraisers field complaints from 10 to 12 percent of the total appraisals.
For example, of 800,000 annual appraisals in Dallas, 70,000 to 80,000 property owners protest, officials there say.
The El Paso CAD cites several reasons for why property values rocketed for 2004.
The tight real estate market of 2003 – in which houses were selling within days, even hours, of being posted – pressured property values upward, said Jerry Griffin, CAD director of valuation.
“Up until three years ago, we had a real slow residential and commercial real estate market,” he said. “If it continues, yes we will (have to appraise more often) to keep property owners from experiencing large property value increases.”
As for why some homes are overvalued, Griffin blames a general lack of information. He points to a controversial Texas nondisclosure law, in which buyers do not have to disclose the sale price of a property. Though the CAD mails surveys to all buyers, comprehensive information about sales is not always available, particularly for houses on the very low and very high ends.
“The state legislature does not provide the yardstick,” said Griffin. “We don’t have full disclosure.”
As many as 46 other states do authorize full disclosure, he says.
Elliott says such astronomical increases in value cannot be attributed exclusively to a hyperactive real estate market. He points instead to the CAD’s decision to reclassify many neighborhoods. Classification determines the quality of a home. There are 12 levels (from two to 14); the higher the number, the better the quality.
The increases in property values represent “what appears to be an excessive appraisal course they are taking on the residential side,” said Elliott. “They have gone and reclassified whole subdivisions.”
One client saw his home go from class eight to class 10 – a $25-per-square-foot difference, said Elliott. Another client, who lives in Kern Place, saw his property jump from a class four to a class 13 – from $80,000 to $150,000.
“That’s going to be a hard challenge for any of us to meet,” he said.

Methodology in play
The wild flux in property values, and the seeming random assignment of values on homes that may not deserve it, beg the question: How does the CAD arrive at its numbers?
In a transcript of recent testimony given to the Texas House of Representatives Committee on Local Government Ways and Means, Mayor Joe Wardy said, “Populations move, real estate transactions take place constantly, areas both improve and deteriorate over a period of years, and our appraisals must be flexible enough to reflect these changes, but do so in such a way as to maintain some level of consistency.”
Wardy asked the committee to review the CAD’s methodologies to ensure the district is following the most up-to-date practices.
But according to area appraisers – best practices or not – there are basically three ways to appraise property: through the cost, sales (sometimes called market) or income approaches.
The income approach is primarily reserved for commercial or industrial properties, and appraisal districts in Texas tend to use a combination of the other two approaches.
The cost approach is a formula that essentially adds the cost of the land to the cost of the structures on the land, then subtracts depreciation to arrive at the current value of the property. The El Paso CAD uses the cost approach to start, and resorts to the sales approach only during the protest process.
“We don’t get to go inside and look at every property,” said Griffin.
The sales, or market, approach compares sales prices of homes of similar attributes in the same neighborhood. The appraiser assigns a value to a home based on what other, like homes are selling for.
The Dallas Central Appraisal District uses both the cost and sales approaches from the get-go on all residential properties.
“With the cost approach, you get to distinguish various attributes of a property: the number of bathrooms, if it has a fireplace or a pool,” said Doug Gossom, director of appraisals for the Dallas CAD.
“We also gather sales information,” said spokeswoman Cheryl Jordan in a joint interview with Gossom. “What is the market value of a property? What will a buyer pay and what will a seller take?”
El Paso CAD’s antiquated computer system does not allow for the dual-faceted approach, says Griffin, but the CAD has already purchased a replacement system similar to the one in Dallas.


Armed at the hearing
Too many property owners go into hearings ill-prepared to present a successful case, say those involved with the process.
Review board members have wide discretion to decide a case and assign value to a property. During a hearing, the appraiser presents evidence supporting the value he assigned, including sales figures of comparable properties.
Owners often buttress their cases with little more than a plea.
“A lot of people walk in and say, ‘I don’t like my property appraisal. How come you did it this way?’” said Ted Andresen, of Andresen & Co. “The first thing (property owners) need to do is be prepared.”
Appraisal professionals offer this advice to property owners: Arm yourself before the showdown.
• Order a copy. On the first floor of the CAD, at 5801 Trowbridge, property owners can order a copy of their appraisal through an automated machine.
• Understand the jargon. Ask a district appraiser to explain the appraisal. Check to make sure the size of the land, home and other variables are correct. If not, bring to the hearing blueprints or other records that prove the appraiser’s measurements were inaccurate.
• Document the defects. The CAD sometimes overvalues homes in old neighborhoods, where some houses have been refurbished – and sell for large sums – while others may be deteriorating. If your home has not been remodeled, and needs repairs, document those defects. Take photographs, or ask builders to provide statements.
“Take a lot of pictures of what’s not right about the house,” said Elliott. “When was the last time you got a new air conditioner? Does the house have the original, 20-year-old furnace? Document things (about the property) that are not 100 percent.”
The system appears to favor property owners who protest: During preliminary hearings, 49 percent of owners win some reduction on the value of their property, says Griffin. Of the remaining protestors, 50 percent receive a reduction during the review board hearings.