Does Sale Price Equal Assessed Value for
Real Estate Tax Purposes in the State of Texas?
By Jerry Heaton, Senior Managing Consultant, Dallas
& James Sutton, Managing Consultant, Dallas
Texas is one of the few states that does not require the disclosure of a real estate transaction, thus sale prices are
not readily available to the public. For real estate tax purposes, if a sale price is disclosed, most tax assessors in the
State of Texas will raise the property value to the disclosed sale price. If a sale is not disclosed, however, many
assessors will still know the property traded due to the deed being filed. The assessor will often then research the
loan amount on the property and raise the property value to a number higher than the loan amount.
In Texas, tax assessors will conduct a mass appraisal on properties at least every three years, and more frequently
for most income-producing real estate. The mass appraisal on properties is conducted using a variety of appraisal
techniques. If an appraisal district is able to accurately locate a sale price of a commercial property through a
resource such as Loopnet or CoStar, they will likely value the subject property at or just below that value.
However, there are a multitude of reasons why the sales price may not be considered an acceptable value for
property tax purposes. The following factors may be the cause of an over-stated value, all of which and more are
grounds for dismissing a disclosed sale price:
1) A property that is subject to a sale-leaseback
2) A property that is part of a portfolio of properties and the price disclosed was an allocation of a bulk
purchase
3) A property that was traded with tax incentives such as a 1031 exchange
4) A property that is part of an assemblage of properties where the buyer was atypically motivated
Even if a sale is disclosed and was clearly an arms-length transaction, Texas allows for a tax appeal using a
provision of the tax code commonly called “fair and equal” taxation, which dictates that no property should be
assessed at a value higher than a reasonable number of competing, appropriately adjusted comparable
properties. Therefore, if the tax assessor raises the value of a property to meet the sale price but they do not raise
the value of all surrounding like-kind buildings, then the assessor has not valued the property that sold on a “fair
and equal” basis. Similarly, if two apartment buildings are in the same class, same area, have similar rents, and
were built around the same time frame, but an assessor raises the value on the one that sold for $100,000 per
unit while leaving the others in the area at say $80,000 per unit, then that is not a “fair and equal” assessment.
In order to correct this problem, tax consulting firms like Paradigm Tax Group will fight the “unequal” assessment
through the appraisal review board process and often times a court battle. This court battle is rarely ever a trial by
jury. It is usually settled in an informal setting with appraisal district staffers without excessive cost to the
taxpayer. Paradigm has coined this process a “Purchase Price Defeat” tax appeal.
The chart below shows a few examples of actual Purchase Price Defeats achieved by Paradigm Tax Group that
have saved millions of dollars for many astute taxpayers. Paradigm is one of the largest, fastest-growing property
tax consulting firms in the nation. With offices in Dallas, Houston, San Antonio and Austin, we have the personnel
and local expertise to help you achieve maximum tax savings no matter where you own property in Texas. For
more information on the Purchase Price Defeat process and a complimentary “equal and uniform” report for your
property, please contact Jerry Heaton at [email protected] or (214) 635-4875 or James Sutton at
[email protected] or (214) 442-6072.
Examples of Successful Purchase Price Defeats
County
Property Type
Initial
Assessed Value
Latest
Settlement Offer
Estimated
Tax Savings
% of Assessment to
Sales Price/Cost
Numbers
Approx. Sale Price
or
Construction Cost
Collin
Office
$52,126,738
$42,490,000
$240,000
77%
$55,000,000
Dallas
Office
$44,500,000
$34,600,000
$245,000
68%
$51,000,000
Dallas
Office
$22,400,000
$16,600,000
$145,000
61%
$27,000,000
Dallas
Industrial
$16,955,450
$12,024,810
$125,000
71%
$17,000,000
Denton
Retail
$10,261,747
$4,639,390
$140,000
45%
$10,000,000
Denton
Industrial
$6,800,000
$4,502,260
$60,000
32%
$6,600,000
Tarrant
Multi-Family
$15,300,000
$11,400,000
$100,000
78%
$14,600,000
Tarrant
Retail
$17,462,641
$13,644,610
$95,000
78%
$17,100,000
Tarrant
Industrial
$53,730,626
$51,069,323
$65,000
81%
$63,000,000
Tarrant
Multi-Family
$9,721,300
$8,325,000
$35,000
87%
$9,600,000