So I know HCAD typically assesses value sometime in Feb/March.

I am currently building a have it slated to begin at the end of February with completion end of June.

My question is how will the county assess taxes for the year? Would it be based on simply the lot? Or the finished house even though it won't be done until June/July well after HCAD assesses the value?

I fully realize that when it comes to 2020 I'll have to budget for taxes based on having a house on the land. Just wondering it my payment will be lower for the balance of 2019. Would be nice since I'm going from a $1350 mortgage to $2350 (when fully assessed). With two kids in daycare Oct 19 - May 20 it would be a nice break for 2019 after moving.

Assessed values are based on the condition of the house on Jan 1 (values just typically aren't released until a few months later). If the house was partially constructed on Jan 1, HCAD will probably assess based on some percentage completion. They probably won't assess it as an empty lot unless it really was an empty lot, but it shouldn't be the full value, either. At least that's what occurred in my 'hood the first year.

TXTransplant said:

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Assessed values are based on the condition of the house on Jan 1 (values just typically aren't released until a few months later). If the house was partially constructed on Jan 1, HCAD will probably assess based on some percentage completion. They probably won't assess it as an empty lot unless it really was an empty lot, but it shouldn't be the full value, either. At least that's what occurred in my 'hood the first year.

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At the moment it is a lot of mud. At best it'll be a slab by end of February/early March.

So what I gather is that for my mortgage payment July-December this year I'll have to pay way less correct?

Then obviously come next year I'll have to set aside extra money until my mortgage company catches up to the actual value because at the end of 2020 my taxes will be much higher.

If you don't have a slab, yet, then you will probably just be assessed for the empty lot, and you should be able to see what that was for 2018 to estimate what you will owe at the end of the year. Your mortgage company may or may not "estimate" what the taxes will be once the house is complete and factor that into your mortgage payment when you close. If they do, you will just end up with more money than you need in your escrow account to pay 2019 taxes.

A word of caution, though. The last house I owned, I had it built. It was an empty lot on Jan 1, and at closing, we knew that's what the CAD assessed it for. However, I escrowed, and my lender required me to bring enough cash to closing to fund the escrow account to what they estimated would be the FULL taxes once construction was complete. They didn't tell me this until a few days before closing. Thankfully, I had the extra cash (it was like another $3-4k), but considering I was already putting almost $50k down, I was not happy about it. They also factored in what the taxes would be at completion and factored that into my monthly payment. So, I wound up with a whole lot of extra money in my escrow account at the end of the year. My mortgage company returned it to me, but not until the end of the year, once taxes for the year were paid (I closed on the house in May),

I've never heard of any other lender doing this, but the way you can avoid any hassle at all is to just not escrow (I don't anymore).

What is the Taxpayer's Role?
You can play an effective role in the process if you know your rights, understand the remedies available to you, and fulfill your responsibilities as a property owner and taxpayer.
Know Your Rights:

• You have the right to equal and uniform tax appraisals. Your property value should be the same as that placed on other properties that are similar or comparable to yours.
  Unless your property qualifies for special appraisal, such as for agricultural land, you have the right to have it taxed on its January 1 market value.
• You have the right to receive all tax exemptions or other tax relief for which you apply and qualify.
• You have the right to notices of changes in your property value or in your exemptions.
• You have the right to know about a taxing unit's proposed tax rate increase and to have time to comment on it.

Understand Your Remedies:

• If you believe your property has been appraised for more than its January 1 market value, or if you were denied an exemption or agricultural appraisal, you may protest to the appraisal review board. If you don't agree with the review board, you may take your case to court.
• You may speak out at public hearings when your elected officials are deciding how to spend your taxes and setting the tax rate.
• You and your fellow taxpayers may limit major tax increases in an election to roll back or limit the tax rate.

Fulfill Your Responsibilities:

• You must apply for exemptions, agricultural appraisal, and other forms of tax relief before the deadlines.
• You must see that your property is listed correctly in the appraisal records. If your property is omitted from the records and escapes taxation, it becomes subject to a back assessment. In the event a back assessment occurs, it may cover up to five prior years in the case of real property (land and improvements), and up to two prior years for business personal property.
• If you own tangible personal property used for the production of income (business personal property), you must annually render it to the chief appraiser. Personal property which escapes taxation because of failure to render becomes subject to back assessment when discovered by the appraisal district.
• You must pay your taxes on time.

While all of the above is useful information, the OP doesn't own the property, yet, and likely won't own it in time to protest the 2019 value. And I doubt the builder is going to question the HCAD value.

But make sure you do all of that in 2020!

Wait...you're having a new house built in 4 months?!?

We have our house being built currently. Construction started in November. Should finish up in April/May. It was my understanding that construction work in progress is not taxable until the following year in Texas (we are in Harris County) so we pay the lot value this year and prepare to pay a lot more the next.

speck3 said:

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We have our house being built currently. Construction started in November. Should finish up in April/May. It was my understanding that construction work in progress is not taxable until the following year in Texas (we are in Harris County) so we pay the lot value this year and prepare to pay a lot more the next.

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There are houses in my neighborhood (in Harris Co) that were assessed based on partial construction, if the lot was more than just an empty lot or slab on Jan 1.

Year we moved in my valuation was initially about 75% of what the completed value would be. I protested and had date-stamped pictures of progress on or around Jan 1. Ended up meeting with a guy in the tax office before my protest and got it lowered to about 33%.

The answer is "it depends'. I know that really helps right? Some variables are

1. timing of completion. the later the year the odds are better you pay just lot value that year. Earlier gives the county time to find it.

2. County specific policies. They can vary

3. Size of the county and appraisal staff. Smaller counties with less construction will have a higher rate of catching the house earlier.

As for lenders they are also different. I have seen them just assign a 1-1.5% value to the home until the county catch up and I have seen them ask Title for a document declaring the county tax rate and manually apply that to the value of the home.

Depends on the lender in most cases. For example DR Horton will set up your loan with the lot value and then you'll get the surprise new pmt the following year. At Movement we establish your mortgage pmt based on the tax ratepurchase price80% to factor in the homestead exemption. In my opinion it's better to avoid setting the client up for failure. Hope this helps.

TXTransplant said:

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A word of caution, though. The last house I owned, I had it built. It was an empty lot on Jan 1, and at closing, we knew that's what the CAD assessed it for. However, I escrowed, and my lender required me to bring enough cash to closing to fund the escrow account to what they estimated would be the FULL taxes once construction was complete. They didn't tell me this until a few days before closing. Thankfully, I had the extra cash (it was like another $3-4k), but considering I was already putting almost $50k down, I was not happy about it. They also factored in what the taxes would be at completion and factored that into my monthly payment. So, I wound up with a whole lot of extra money in my escrow account at the end of the year. My mortgage company returned it to me, but not until the end of the year, once taxes for the year were paid (I closed on the house in May),

I've never heard of any other lender doing this, but the way you can avoid any hassle at all is to just not escrow (I don't anymore).

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My lender did this but actually gave me the option of bringing completion value tax or land tax to the table at close because they didn't know how it would be assessed for me. I chose completion value because I am conservative resulting in a 4 year hassle....

Year 1: Massive refund check
Year 2: Escrow "re-balances" monthly payment based on year 1 actual resulting in a the escrow account being under funded. I called at the beginning of year two to tell them this would happen but they wouldn't/couldn't change their system (so I self escrowed to account for the imbalance).
Year 3: Monthly mortgage payment skyrockets to "catch up" from year 2 (they give you the option to pay the underpayment of tax all at once or spread over the next year interest free).
Year 4: My escrow finally takes the correct amount each month!!!!

I hear this is pretty common with new builds....

Edit to add that I took the option of coming to close with completion value tax assessment.

I wish I'd been given that option! Instead, I had to fully fund escrow at closing to the tune of $3-$4k, and I made 6 months of mortgage payments with the payment for the full tax assessment going to escrow. At the end of the first year, I had something like $6k in my escrow account, and my tax bill was less than $1k! Thankfully, getting my money from my lender was easy, and I didn't have any other problems after that.

But I only got a few days notice about the extra $ that I needed to bring to closing. Thankfully, I had it, but I could see where something like that could totally torpedo someone's purchase deal and turn closing into a nightmare.

This is why I no longer escrow!

I spent 60 days fighting with the appraisal district that my slab and half framed house was not 60% complete as of Jan. 1st. They said that if I had a slab and one piece of wood in the air it was 60%. I don't do well fighting illogical people and lost.

This year I will have to deal with the fact that my square footage is off by 1000 square feet. They have my attic as finished space because it looks that way from the outside. I have invited them into the house to verify that it isn't finished but they won't go in the house. I have provided pictures with dates in an almost proof of life kind of way and my construction plans. It may get legal by the time I am done with them.

I have often wondered if over-appraising stunts like this are grounds for a class action lawsuit. I've seen too many instances in Harris Co where it's obvious the property was blatantly over-appraised. It's up to the homeowner to fight, and who wins and who loses seems to be random or luck of the draw vs actually based on the merits of your argument.