Untitled Texas Attorney General Opinion

                              ATTORNEY GENERAL OF TEXAS
                                           GREG       ABBOTT




                                                 May 30,2012



The Honorable Kevin P. Eltife                           Opinion No. GA-0943
Chair, Committee on Administration
Texas State Senate                                      Re: Whether, in determining the market value of
Post Office Box 12068                                   a residence homestead, a chief appraiser is required
Austin, Texas 78711-2068                                to consider the value of previously sold foreclosed
                                                        residential property (RQ-1029-GA)

Dear Senator Eltife:

        You ask whether chief appraisers, in determining the market value of a residence homestead
for ad valorem tax purposes, are "required to take into consideration the value of other residential
property that was sold at a foreclosure sale conducted in any of the three years preceding the tax year
in which the residence homestead is being appraised and meets the other requirements of Section
23.01(c)(I).,,1

         Article VID, section 1(b) of the Texas Constitution provides that "[a]ll real property and
tangible property in this State ... shall be taxed in proportion to its value, which shall be ascertained
as provided by law." TEX. CONST. art. VID, § 1(b). Generally, the Legislature requires an appraisal
district to appraise all taxable property in the district "at its market value as of January I." TEX. TAX
CODE ANN. § 23.01(a) (West Supp. 2011). "Market value" is defined as

                        the price at which a property would transfer for cash or its
                 equivalent under prevailing market conditions if:

                         (A) exposed for sale in the open market with a reasonable
                 time for the seller to find a purchaser;

                        (B) both the seller and the purchaser know of all the uses
                 and purposes to which the property is adapted and for which it is
                 capable of being used and of the enforceable restrictions on its use;
                 and


         j See Letter from Honorable Kevin P. Eltife. Chair, Senate Comm. on Admin., to Honorable Greg Abbott, Tex.

Att'y Gen. at 1 (Dec. 13,2011), http://www.texasattorneygeneral.gov/opin ("Request Letter").
The Honorable Kevin P. Eltife - Page 2              (GA-0943)



                         (C) both the seller and purchaser seek to maximize their
                 gains and neither is in a position to take advantage of the exigencies
                 of the other.

Id. § 1.04(7) (West 2008). The Legislature has further instructed that "[t]he market value of property
shall be determined by the application of generally accepted appraisal methods and techniques." Id.
§ 23.01(b) (West Supp. 2011). Furthermore, "each property shall be appraised based upon the
individual characteristics that affect the property's market value, and all available evidence that is
specific to the value of the property shall be taken into account in determining the property's market
value." Id.

       Relevant to your request, the Legislature amended Tax Code section 23.01 in 2009 to add
subsection (C).2 That subsection states:

                 Notwithstanding Section 1.04(7)(C), in determining the market value
                 of a residence homestead, the chief appraiser may not exclude from
                 consideration the value of other residential property that is in the
                 same neighborhood as the residence homestead being appraised and
                 would otherwise be considered in appraising the residence homestead
                 because the other residential property:

                         (1) was sold at a foreclosure sale conducted in any of the
                 three years preceding the tax year in which the residence homestead
                 is being appraised and was comparable at the time of sale based on
                 relevant characteristics with other residence homesteads in the same
                 neighborhood; or

                         (2) has a market value that has declined because of a
                 declining economy.

Id. § 23.01(c). The Texas Supreme Court has held that the primary objective when construing a
statute is to ascertain and give effect to the Legislature's intent. TGS-NOPEC Geophysical Co. v.
Combs, 340 S.W.3d 432,439 (Tex. 2011). If a statute is unambiguous, we adopt the interpretation
supported by its plain meaning unless such an interpretation would lead to absurd results. Id. Your
request letter explains that appraisers have historically refused to consider neighboring foreclosed
properties when appraising a residence homestead because foreclosure sales do not represent the
"willful and arm's length transaction requirement in Section 1.04(7)(C), Tax Code." Request Letter
at 3. By enacting subsection 23.01(c), however, the Legislature plainly mandated that,
notwithstanding section 1.04(7)(C), chief appraisers must consider "the value of other residential
property that is in the same neighborhood as the residence homestead being appraised ... [and that]


       2Act of May 26, 2009, 81st Leg., R.S., ch. 619, § 1,2009 Tex. Gen. Laws 1404, 1404-05 (codified at TEX. TAX
CODE ANN. § 23.01(c) (West Supp. 2011)).
The Honorable Kevin P. Eltife - Page 3        (GA-0943)



was sold at a foreclosure sale," as long as the other statutory appraisal requirements are met. TEX.
TAX CODE ANN. § 23.01(c)(l) (West Supp. 2011). Thus, when appraising a property, a chief
appraiser may not exclude from consideration the value of neighboring properties simply because
they were subject to a foreclosure sale.
The Honorable Kevin P. Eltife - Page 4      (GA-0943)



                                    SUMMARY

                     Pursuant to Tax Code section 23.01(c), a chief appraiser,
              in appraising a residence homestead, may not exclude from
              consideration the value of neighboring properties simply because
              they were subject to a foreclosure sale.

                                            Very truly yours,




DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chair, Opinion Committee

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee