Issue
Some appraisal districts, cities, and counties argue for full disclosure of all real estate sales prices to establish the value of real property in Texas. But there are numerous problems with basing value, especially taxable value, on the sales price of a real property.
Special considerations, such as seller concessions are not articulated in final sales prices, nor are the nuances of irregularly-shaped lots or custom-built homes.
Farm and ranch property transactions may include improvements like trade fixtures and livestock in the sales price.
Additional difficulties arise with commercial properties, which may include a business and/or trade fixtures, value of long-term leases, and properties where mineral rights are included or excluded from the sale.
Each of these circumstances can lead to artificially high tax-appraisal values in the purchase year and beyond.
What does this mean for the real estate industry?
Sales-price disclosure could lead to significant property-tax increase for Texas property owners.
High property taxes are already a barrier to homeownership and the relocation of businesses to Texas. Increasing property taxes would be a disincentive to homeownership and enterprise, hurting the real estate market and the Texas economy.
Texas REALTORS® position
Texas REALTORS® opposes all legislative efforts to require the disclosure of sales-price information because:
- Sales price is not necessarily a good indicator of taxable value
- It’s an unnecessary invasion of privacy
- It could pave the way for a new real estate transfer tax in Texas, as most states that require sales-price disclosure use it to compute tax liability for the transfer of real estate
Legislative outlook
Central appraisal districts may seek full sales-price disclosure of all real estate transactions in Texas. This includes residential, commercial, industrial, raw land, and farm and ranch.
The Texas Legislature has consistently rejected previous proposals to do so, stating that government intrusion into the private lives of Texans is not an option.
Historical perspective
The appraisal process we know today was created by the Legislature in 1979 and was fully implemented in January 1982. Mandatory sales-price disclosure was part of the debate then and has been ever since. Prior to a central appraisal process, each local taxing jurisdiction valued real property separately. The city could have one value on their books while the county had a completely different value.
Since 1982, real property in Texas has been subject to a local property tax administered at the local-taxing-jurisdiction level. CADs are tasked with appraising real property for ad valorem taxation purposes. Many of these appraisal districts have called upon the Legislature to pass sales-price disclosure to enable districts to adequately appraise real property.
In 2006, Gov. Perry created the Texas Task Force on Appraisal Reform, and the final report stated, “Most appraisal districts do not have the internal capacity to analyze complex financial or commercial transactions.”
During the 81st Texas Legislature in 2009, lawmakers passed comprehensive appraisal reform in the form of numerous bills aimed at reforming the process. Specifically, the Legislature passed HB 8, which enacted a Methods and Procedures Audit on all 253 appraisal district in Texas. The comptroller’s office was tasked with implementing the bill and has completed the audits.
In 2009, the 81st Texas Legislature also passed (and voters approved) a constitutional amendment which allows for uniform appraisal standards to be used in all appraisal districts.
Bills have been filed in every recent legislative session seeking to mandate sales price disclosure; however, lawmakers have not advanced this legislation.
The Texas Comptroller of Public Accounts, in the most recent report on appraisal districts and appraisals, stated that all real property in Texas is being valued at 99% of market value.1 Based on this official report, it can hardly be determined that real property appraisals in Texas are inaccurate.
1 School and Appraisal Districts’ Property Value Study 2019 Final Findings, 2019 State Totals Summary Worksheet, August 2020, http://comptroller.texas.gov/auto-data/PT2/PVS/2019F/ ALL0000001Y.php