One of Texas’s most essential marketing engines for real estate agents is referrals and repeat business. Staying in contact with past clients throughout a long multi-year cycle can keep you top of mind when they’re ready to buy a new home, and it can also bring in a lot of referrals. On average, agents get 42%—nearly half—of their business from repeat clients and client referrals.
But to get those leads, Texas real estate agents need to provide more than a successful real estate transaction. You also need to be helpful, resourceful, and informative beyond the basics of handling the deal. Knowing the details of local property taxes—such as the rates in different communities, the property exemptions property buyers should get, and how to best manage property taxes throughout the years—helps provide another layer of service and helpfulness.
When referrals and repeat clients are a significant portion of your business (or you want that to be the case), have resourceful answers and information ready to guide your clients. In this guide, we help you start with a strategic overview of what realtors should know about Texas property taxes and four critical benefits—including how to make property tax information part of your communication strategy.
When Do Real Estate Agents Need to Know About Property Tax Exemptions?
As a real estate agent, knowing the administrative and bureaucratic details about the communities your buying or selling clients care about is always helpful. Your clients may have specific questions or a tight monthly budget for managing their mortgage. When you know the different property tax rates of cities, even cities that are right next to each other but have very different tax rates, you can more effectively guide your clients toward the best option.
Knowing about property tax exemptions is just as important. Your clients may not realize they can apply for various exemptions and see significant savings on their property tax bill (and mortgage) each year. They may also need clarification about the difference between appraised and market values. Some of the particular circumstances in which real estate agents should be particularly knowledgeable about property tax exemptions include the following:
- If you’re representing first-time homebuyers who may be utterly unfamiliar with property taxes in general
- Clients who are interested in purchasing farmland
- If you have potential clients who are downsizing and approaching retirement age, so may be eligible for the over-65 exemption
- If you represent senior or disabled clients who are worried about losing their tax savings if they move
Being knowledgeable doesn’t just help you find your clients’ properties that fit their financial or lifestyle needs better. It may differ between moving to or staying in their current home.
Related: What Real Estate Agents and Clients Should Know About Property Taxes
What Do Real Estate Agents Need to Know About Property Taxes, and What Should They Share With Their Clients?
All residential real estate agents benefit from understanding the basic concept of property tax exemptions, when property owners can apply for them, and the process of applying for them. Here’s a quick cheatsheet of critical concepts you and your team should know before broaching the topic with clients or answering any questions:
How Do Property Tax Exemptions Work in Texas?
Tax exemptions primarily exempt or remove a portion of a property’s taxable value from property tax calculations. For example, the general residence homestead exemption removes $40,000 of a property’s worth from the total of school district taxes (one of the many levies bundled under the general concept of ‘property taxes.’)
This does not mean homeowners save $40,000. It means they don’t pay that specific tax for $40,000 of their property’s value. It’s essential to be very clear about the particular scope of each exemption. It’s also worth noting that the homestead exemption can take up to two years to kick in. See below for more details:
What Are the Most Common Types of Property Exemptions?
Texas offers multiple types of exemptions, each with different features and benefits. The most common options and their primary components are:
- General residence homestead exemption: Primary residence owners can waive $40,000 of their property’s value from school district tax calculations. The appraisal district also cannot increase the property’s value by more than 10% (aside from increases due to renovations).
- Over-65 exemption supplements the homestead exemption for property owners over 65 years old. It increases the exemption from $40,000 to $50,000 and caps the school district taxes owed so it doesn’t grow.
- Exemption for homeowners with disabilities: This is similar to the over-65 exemption and cannot be combined.
- Exemption for disabled veterans: The exemption amount ranges from a few thousand dollars to a 100% exemption based on the property owner’s VA disability rating. It can also be applied to any veteran’s property, even if it’s not their primary residence.
- “Ag exemption”: Rather than a proper exemption, this is simply an alternative way of calculating taxes based on the land’s production value instead of market value, effectively reducing the property tax bill for agricultural homesteads.
Real estate agents should have a basic understanding of these options and features. It’s also essential for you to clarify to your clients that filing for exemptions is wholly separate from filing a protest notice and protesting property taxes. Explaining the differences and benefits can make you a reliable source of insight, even after the deal is finished.
How Do People Get Exemptions?
Local governments handle local property valuations and taxes. While the state mandates the particulars for exemptions and creates the application forms, property owners should work with their appraisal districts to apply for and manage their exemptions. You can explain what documents should be filled out and what deadlines apply. For example, the general deadline for property tax exemptions is May 1st.
Appraisal districts need exemptions to be settled as they begin finalizing the district appraisal roll or the final property value numbers for a given year so they can pass them off to the local tax office (which is then responsible for calculating property tax bills for residents).
As a realtor, you should also know how property taxes might change over time. This can include:
- Knowing if there is legislation that may change the effects of exemptions (such as recent moves to increase exemption amounts or decrease the property valuation cap for homesteads)
- Knowing the general trends of property tax rates in your top areas
- Having information about pending votes and Texas Senate or House motions that can affect property tax exemptions in the future
Related: What Are the Recently Proposed Changes in Homestead Exemptions, and Will They Help?
4 Benefits of Knowing the Ins and Outs of Property Taxes for Texas Realtors
This may seem outside of the scope of real estate transactions. As a licensed professional, you certainly don’t want to risk giving information you’ll be liable for or are not allowed to discuss. However, providing general insight into property tax exemptions, offering objective and up-to-date facts regarding property taxes, and pointing your clients toward reputable resources is worth the time and effort. Here are four reasons why.
1. You Become a Trusted Source of Knowledge, Especially for Out-of-State and First-Time Homebuyers
Many people are overwhelmed by house-buying, especially if they aren’t familiar with the Texas real estate market. Providing guidance, minimizing frustration and uncertainty, and showing how property tax exemptions can help your clients find properties within their budgets can make all the difference, especially if you market yourself as a white-glove service.
2. You Don’t Give Clients the Wrong Information (Putting Them or Yourself at Risk)
It’s easy to get the details surrounding property taxes wrong accidentally. Giving an outdated or incorrect property tax rate or explaining the potential savings of a tax exemption can put your license and reputation at risk. But instead of giving out misguided information or refusing to give any insights, you can build a solid repertoire of knowledge and next steps for your clients.
3. You Provide a Better House-Buying Experience When You Can Discuss the Details
Savvy house-buying approaches require an understanding of granular details. Your senior clients, for example, are perhaps on a relatively fixed budget, and they don’t want to risk paying higher school district taxes; if you don’t understand how the exemption’s cap works and can’t find a suitable property with a similar tax obligation, they may not move at all, losing you a transaction and the confidence of your clients.
4. You Have Natural Followup Points to Keep Past Buyers in Your Current Client and Referral Pipeline
This may be the best value of all: when you understand how property tax exemptions—and property taxes in general—work, you have a great reason to reach out to your clients twice or three times a year:
- You can reach out when property tax bills come out in the fall to see if they have any questions about the statement.
- You can reach out in January to see if they have any questions about their escrow account or how to pay property taxes).
- You can reach out in the spring to remind them about filing for their exemptions or protesting their property taxes.
These helpful, well-timed reminders and support set the stage for a long-lasting client-realtor relationship. You can build out the schedule of touchpoints in even more detail for the first year after purchase, answering their questions and helping them navigate the initial filings.
Stay Up to Date on Property Tax News and Insights With Home Tax Shield
The more informed you are, the better you can inform your clients and prospective clients. This concept extends far outside the particulars of the real estate market. It should include information such as property tax exemptions, annual “to-dos” that new homebuyers should act on, and general community information.
At Home Tax Shield, we help property owners manage their property tax protest process in the spring and provide timely insights into trends affecting properties across Texas. Sign up today to see how our process works and have us manage the property tax protest on your behalf, or check into our blog for frequent news and updates.