Unlocking Texas Property Taxes: Insights from a Tax Expert

00:00:13 - Mike Mills

 

Well, hello, Internet. So, tax season has rolled around again. And let's be honest, it is nobody's favorite time of year, especially in Texas, where property taxes, although not due yet, they do have property valuations that are going to be coming out really soon. And these upcoming Millss seem to be the most grumbled about and least understood of them all. So today, we are dragging you kicking and screaming into the exciting world of property taxes. And this is the Texas Real estate and finance podcast. And I'm your host, Mike Mills, a North Texas mortgage banker with Mike Mills Mortgage and Finance, and your tour guide through the confusing maze that we call this wonderful real estate industry. So imagine this. You or your client finally sealed a deal on that perfect dream home, only to be greeted a year later by a completely unwelcome surprise, a hefty tax Mills that skyrockets your mortgage payment by hundreds of dollars each month. Are you surprised? Are you disappointed? Well, you are in good company. It is a very common story across the state, especially around tax season. So today we are peeling back the curtain to reveal why this happens and more importantly, how you can prevent it from happening to you. Now. By the way, if you manage to sit through our tax adventure today without dozing off, first off, congratulations. Second, how about showing some love, like comment or share this episode? It helps more than you know. Plus, let's face it, building a podcast audience is tougher than explaining tax codes to a toddler. So your involvement helps an old bald man have a reason to come back next week. So I appreciate each one of you being here, and please share it if you love it. So now, in the realm of taxes, there are those who teach, and then there is Doctor Blake, who brings a whole new level of flair to the economics of everyday life. As an associate professor and economist at Texas A and M, he has, he's got to know how to break down complex tax concepts into bite sized, digestible, and, yes, even enjoyable pieces. And he's here today to dump his brain on us. So please welcome to the podcast, Doctor Bennett. How are we doing, Doctor Bennett?

 

 

 

00:02:08 - Dr. Blake Bennett

 

Not much of a pressure there that you put on me. You want an economist to be entertaining and keep people away.

 

 

 

00:02:19 - Mike Mills

 

That's what I heard about you, is you, you have a flare for it. So I, I think even in our brief conversation here beforehand, I think this is going to be great because, you know, everybody hates taxes. It's nobody's favorite friend. And to pretend like it's an exciting topic is being disingenuous. So, so it is not exciting. But it is certainly something that if you don't understand it and you don't know it, it can come around and bite you in the butt pretty hard. So, um, you know, it's. It's necessary evil sometimes to bite the bullet and understand how all this stuff works, because, you know, most of my audiences, realtors, real estate professionals, and them being able to explain this to their clients as they go into buying new construction, buying homes, you know, that people have lived in for a long time. These are all the kind of things that they need to be able to forewarn their clients about because, as you'll explain, I'm sure, you know, at the end of the day, there's nothing we can really do too much about the taxes. You got to pay what you got to pay, but got to be prepared and you got to be aware. So. So, first off, how. How did you get into, you know, I know you're, you're at a and m university as a professor there, but how did you get into the, the tax circuit, you know, going around talking to folks about property taxes?

 

 

 

00:03:29 - Dr. Blake Bennett

 

Well, you know, I actually, I'm in the Dallas office. I am associated with a and m, but I'm with Texas A and M agri, life extension. Our job, do outreach, education to the public. So that is my normal job that I. About seven, eight years ago, I started getting into working with real estate industry. Traditionally, I work with landowners. And we noticed, you know, these landowners, they're having the same questions year after year after year. We're seeing the same ones time and time again. And I thought, you know, it would be nice if we could segue in and catch them earlier. And that means let's work with real estate and let, let the real estate profession know that we actually exist. And we provide, we provide assistance. We answer questions. We do education. So, started working with real estate, and then it's just grown from there. And, you know, we have several classes that we teach. I'm booked up pretty much all the time, working all over the state at this point. I'm based in Dallas, but San Angelo's on the, on the. On the ticket for next week and the week after that, so it's all.

 

 

 

00:04:47 - Mike Mills

 

Over the state, so super exciting life. You get to roam around the state of Texas talking about taxes. Lucky you.

 

 

 

00:04:54 - Mike Mills

 

Yeah.

 

 

 

00:04:54 - Dr. Blake Bennett

 

And you know what? This time of year, it's not bad to drive around the state and see all the bluebonnets and everything that's blooming.

 

 

 

00:05:00 - Mike Mills

 

Yeah.

 

 

 

00:05:01 - Dr. Blake Bennett

 

You know, you get the winter months, and it's kind of a tough drive, but to see, a lot of the states, it's, it's fun.

 

 

 

00:05:09 - Mike Mills

 

No, go ahead.

 

 

 

00:05:10 - Dr. Blake Bennett

 

No, I, and I was going to say, you know, and the people, the people were really. What makes, what makes it exciting and fun.

 

 

 

00:05:17 - Mike Mills

 

Yeah.

 

 

 

00:05:18 - Mike Mills

 

You meet all kinds of different folks out there roaming around the state, I'm sure.

 

 

 

00:05:21 - Mike Mills

 

All right.

 

 

 

00:05:22 - Mike Mills

 

So when, when we do talk about taxes, everybody's favorite subject, when you talk to realtors specifically because that's what a lot of your classes are geared towards, correct?

 

 

 

00:05:31 - Dr. Blake Bennett

 

Yes, absolutely.

 

 

 

00:05:32 - Mike Mills

 

So when you do that, what do you find as one of the biggest, you know, misconceptions, like just right out of the gate when, when you hear from people of asking questions about this that you think they would understand, but generally speaking, kind of don't really get.

 

 

 

00:05:46 - Dr. Blake Bennett

 

You know, I think one of the biggest misconceptions is one, is a trap that I fell into myself whenever I built my first home. You know, you close on the home, you move in and the, the bank estimates this is going to be your payment. So as you know, some goes to principal, some goes to interest, and then you got some that goes into escrow to help pay for property taxes and insurance. The first year that you close, chances are the full market value of that property is not being taxed. The property is probably being taxed as an unimproved lot because January 1, the home was not livable and so the appraisal district values it is an unimproved lot. It's year two that the structure gets added and so lenders may not pull enough into escrow to pay the property taxes based on the improvement, plus the lot. And so you could see, in year two, you could see your, your property tax Mills. Shoot to the upside. There's not enough money in escrow. And so the bank gives you a couple of options. You can either bring it up to speed right now and cut us a big check, or we can increase your payment for the next twelve months to get escrow up to where it should be. That was a huge shock. Whenever, whenever I built my first house, you know, a long time ago, over 20 years ago, it really was a shock and sent us scrambling. How are we going to come up with this extra money? And honestly, either option is not good for us at the time. What we decided to do is we refinanced one year in and rolled that in. And that, that was a chore in and of itself cost us a little bit of money, but we didn't have another option. My mother went through the same thing, but I was prepared this time she. She built a new house, moved from West Texas, and she built a home, moved down to the metroplex. Yes, January 1. It was an unimproved lot, according to the appraisal district. But I let her know this letter is coming from the lender because your escrow is not going to be, you're not going to pull enough into escrow. So get ready, start putting money aside right now, because next year, you're going to get that letter, and you're going to have to bring that escrow up to the level that it needs to be seen. Pay your property taxes.

 

 

 

00:08:18 - Mike Mills

 

Now, do you see, is it, is it a situation where with builders, do they have kind of general agreements, I guess you would call it with the county or whatever, that when they buy the land and they're going to improve it and build property on that land, part of the incentive, I guess you would call it, for them to do so is that they don't actually have to pay improved taxes until they sell, until this property is sold. Is that kind of generally how it works? So even if it sat there for a year and didn't get purchased, would they have to pay on the improved value?

 

 

 

00:08:44 - Dr. Blake Bennett

 

No, they would. As soon as that home is deemed as livable, then. Then it's full market value on that home. Okay, so that's why you'll see. That's why you'll see builders, particularly in the neighborhood, they really, if they're gonna do a spec house, boy, they want to move it as quick as possible. They would love to move it even before it's finished. So because they don't want that property tax liability, the appraisal district is going to appraise the property based on the land, plus, plus the improvements. And if the improvement is a completed home and it's deemed as livable, then full value. And a builder is not going to want to sit on that for long.

 

 

 

00:09:25 - Mike Mills

 

Right. They want to unload it. They'll take a hit on it just so they don't have to pay the taxes on the property, basically.

 

 

 

00:09:29 - Dr. Blake Bennett

 

That's exactly right. You're exactly right on that.

 

 

 

00:09:32 - Mike Mills

 

Now, um, so we run into this, obviously, a lot, or I should say, I hear about it a lot, because, you know, the way it works with us as mortgage lenders with builders is, you know, it's, it's. Sometimes it can be difficult to compete because builders obviously have the build, and then they have the mortgage company that they work with, and what they end up doing is kind of building the. The cost of giving all the incentives into the actual price of the home, you know, which, you know, a lot.

 

 

 

00:09:58 - Dr. Blake Bennett

 

Of, a lot of my mother did not get a free sunroom and she didn't get free wood floors.

 

 

 

00:10:05 - Mike Mills

 

I mean, you know, maybe, but probably not. There was, there was a cost in there somewhere, but, but, but what I'll hear is when they come back, because a lot of times, you know, the lenders that work for these builders or work with these builders don't do a very good job explaining how this works because we can set up an escrow account or at least prepare people to have the escrow account set up. So that way, you know, when those Millss come due, they're going to have something. Now we don't know. And this is what I tell people all the time. We really don't know exactly what the taxes are going to be until the house is assessed. Right. We can only guess.

 

 

 

00:10:37 - Dr. Blake Bennett

 

Exactly. Yes, exactly. And you've got an estimate as to what the final build price is going to be. Now, that game kind of changed during COVID because, you know, it, building materials were going up by the day. And builders in the beginning, whenever they locked in a price, say, six months ago, this is going to be your final price, they took a hit. And so you saw a lot of builders that they weren't willing to lock in that price until it was done because again, material, building materials were going up by the day.

 

 

 

00:11:12 - Mike Mills

 

Yeah.

 

 

 

00:11:12 - Dr. Blake Bennett

 

And so it was kind of a little bit more of a floating issue. It's starting to calm back down now. But, yeah, you can get a rough estimate as to how much the final, the final price is going to be, land plus structure, and you can get at least close as far as how much you're going to pull into escrow. So it's not that big shock.

 

 

 

00:11:33 - Mike Mills

 

Yeah, well, usually, like what, what we'll do, obviously, is like when we qualify someone to on a new build, if we do get the new build, which does happen, but if we get it, then we will actually, we have to qualify them on what the, what the purchase price is and then the tax rate for that area. That's what I mean, that's what we have to do. And then we can collect that much in escrow if we want to. Or really we can collect whatever. If the borrower wants to collect it at the lower, at the super unimproved value, they can do that. If they want to collect it in a higher value, so they have the money, they can do that. The key is, is that we just have to explain to them what the ramifications are if they choose to collect at the lower premium because that's what's going to impact them. And, you know, it's usually like twelve to 16 months when they get that Mills in the mail and they're like, oh, crap, you know, but as long as we tell them and we prepare them for it, and I say, hey, look, put a little money aside because this is going to come, then for the most part, you know, they understand it just, it's just the preparation of it.

 

 

 

00:12:30 - Mike Mills

 

Yeah.

 

 

 

00:12:30 - Dr. Blake Bennett

 

And again, you know, I was ready whenever my mother built her house. I was not ready whenever I built mine.

 

 

 

00:12:37 - Mike Mills

 

Yeah.

 

 

 

00:12:37 - Dr. Blake Bennett

 

And, yeah, we went with the builder's lender. I mean, we got incentives to go with the builder's lender. We took them, we jumped, we jumped right in the middle of it. But I can tell you that that was a scary time. You know, first house that you build, you're still young, got some young children, and now all of a sudden, how are we going to come up with this extra money? Yeah, I don't know. And then you face a higher mortgage, you know, monthly payment after that. So you, you've got to kind of make some, got to make some adjustments at that point.

 

 

 

00:13:12 - Mike Mills

 

So this also happens on homes that have been purchased that are pre existing, homes that somebody has lived in for a very long time. So can you explain how that works, too? Just as, you know, someone's buying a house that's pre existing, it's not a new build, but yet they still have the same thing happen. It doesn't happen to the same degree, but it does happen. So can you explain how that works?

 

 

 

00:13:32 - Dr. Blake Bennett

 

Absolutely. You know, particularly, we've seen a lot of that with, after, after the pandemic. You know, the real estate market went absolutely bonkers during, during, during the pandemic. And we've seen 30, 40, 45, 50% appreciation from one year to the next. And there's a, there's part of the homestead exemption law that says if you declare a homestead, Mike, then your value, your taxable value cannot go up more than 10% a year.

 

 

 

00:14:04 - Mike Mills

 

Okay?

 

 

 

00:14:05 - Dr. Blake Bennett

 

So it doesn't matter if the, if the market went up 50%, your taxable value, the value that they used to multiply by the tax rates, can only go up 10% every single year. Now, I can go up 10% every year until it catches market value, but it's only a 10% climb. So it's a slower climb up versus just all at once. If I buy your house and you've got that 10% cap and you're working that off new. Chances are you still are.

 

 

 

00:14:38 - Mike Mills

 

Yeah.

 

 

 

00:14:38 - Dr. Blake Bennett

 

The prorated taxes that I'm going to pay that first year from the time that I buy it, and let's say we close today for the rest of the year, my proration is going to be based on your 10% cap.

 

 

 

00:14:49 - Mike Mills

 

Yeah.

 

 

 

00:14:50 - Dr. Blake Bennett

 

As soon as I buy that property, then the appraisal district, that 10% cap goes away. January the first for me. I don't get that protection January 1. So they will catch me up to market value January 1. And it can be a sizable increase, particularly now.

 

 

 

00:15:08 - Mike Mills

 

Yeah.

 

 

 

00:15:09 - Dr. Blake Bennett

 

You, a lot of people that are still working off, and it's 60, 70, 80,000 or more that we're going to see a rubber band effect and it's going to, it's going to jump up.

 

 

 

00:15:20 - Mike Mills

 

Yeah.

 

 

 

00:15:20 - Dr. Blake Bennett

 

So be mindful of that. Your property taxes will jump to the upside.

 

 

 

00:15:27 - Mike Mills

 

Yeah.

 

 

 

00:15:27 - Mike Mills

 

Whenever one of, that's one of the things when I talk to folks about, you know, getting pre approved when we look at addresses, because I'll have them send me, you know, I'll say, hey, look, if you're looking for a house, shoot me the address. I can give you an estimate on the payment, about what you can expect. So that way you'll know, you know, what's coming, uh, before you write your offer. But I also tell them if I see on there, if you're buying a house for 400,000, I look on the county records and I see that it's taxed at 300,000, I'm going to be like, hey, good news is, is for about twelve months or however long, your taxes are going to be lower at what they're at. But you need to be aware that the county's going to come in and raise that value after twelve, you know, at the first part of next year. And you need to be conscious of it because it's going to hit you.

 

 

 

00:16:08 - Dr. Blake Bennett

 

Oh, absolutely. And then, and then let's say that, not that you are, but let's say you're over 65, you know, the value, the year that you turn 65, your value freezes for school tax purposes, doesn't go any higher. So if you're 65 or maybe you're 70 now, 75, and I buy your home. I'm not 65 yet. I'm getting close. Not there yet. Um, I will get a prorated taxes, property taxes based on you being over 65 till the end of the year. Now, next year, that's, that's lifted.

 

 

 

00:16:48 - Mike Mills

 

Yeah.

 

 

 

00:16:48 - Dr. Blake Bennett

 

So I, my value is going to really snap because you get some people that have, that have maybe lived in a home for a long, long time after they turn 65, maybe they've been there 10, 15, 20 years. Whenever they sell, their, their taxable value could be less than 100,000 in the house. Today's worth 750. You know, and so that's a big. That's a big snap.

 

 

 

00:17:14 - Mike Mills

 

Yeah.

 

 

 

00:17:14 - Dr. Blake Bennett

 

That after that, after, after the next January 1 rolls around and now suddenly I get it at full market value.

 

 

 

00:17:21 - Mike Mills

 

Uh oh.

 

 

 

00:17:22 - Dr. Blake Bennett

 

Look out.

 

 

 

00:17:23 - Mike Mills

 

Well, I want to get into the over 65 thing a little bit, because there is a little trick that we talked about. I want you to tell everybody here in just a little bit, but we'll, we'll curb that for right now. But I think that's called a teaser, right? Yes, call that a teaser. But what I, what I, uh, what I'm curious about is, okay, so these new exemptions that came into place this year in Texas, this was a pretty. I don't say a hot topic necessarily. I mean, I don't. I mean, it was debated for a while, but everybody kind of knew. I mean, you look at it across the board like, all right, we had this surplus of, you know, income for the state, and then they, you know, proposed to raise the tax or the exemption on the, on the taxable value for your home based on the school districts and everything else. So can you explain a little bit of the history of, like, what happened there, exactly how this came about? And then also, too, you know, what that actually is? Because I don't think when people think of these, these exemptions, I don't know that they understand what that amount, you know, they're like, oh, you have $100,000 exemption. It's like, well, you got to understand what that is actually impacting. It impacts the taxable value. But I just want you to go through all that for me, if you don't mind.

 

 

 

00:18:33 - Mike Mills

 

Okay?

 

 

 

00:18:33 - Dr. Blake Bennett

 

So whenever you pay property taxes, you've got two components there. You have your taxable value, like you mentioned. So that's what is the value of the property that we can tax.

 

 

 

00:18:44 - Mike Mills

 

Right?

 

 

 

00:18:45 - Dr. Blake Bennett

 

And then you have your tax rate. The taxable value is set by the appraisal district. They're the ones that get to say, this is the taxable value.

 

 

 

00:18:53 - Mike Mills

 

And that's not your market value, by the way. Not your market value.

 

 

 

00:18:57 - Dr. Blake Bennett

 

It's not your market value. They set market value, and then, and then your taxable value is based on what exemptions you get, right? So you can take money off, let's say a home is the appraisal district lists appraises our. Says it's worth $400,000. Well, right now, the. The new law is hundred thousand dollars exemption if for school property taxes. So for school property taxes, you take that value of that market value of the home, 400,000, subtract off $100,000 for school taxes, multiplied by the school tax rate. So effectively, it'd be 300,000 times that school tax rate. And that's how you calculate your school property taxes. That was the change this year is school taxes. The school exemptions are. The homestead exemption for school taxes was increased from forty thousand dollars to one hundred thousand dollars. So they gave us an extra 60. You know, honestly, if you look at it, the savings that we got, $60,000 multiplied by school tax rate, average home is going to save an additional $600 to $750, depending on what the tax rate is.

 

 

 

00:20:18 - Mike Mills

 

Yeah.

 

 

 

00:20:18 - Dr. Blake Bennett

 

You know, it's. It's nice. Market values have shot through the roof over the last few years. That's why they came in with the property tax reform. You know, my thoughts are. Is. Well, that's.

 

 

 

00:20:32 - Mike Mills

 

That's good. Okay.

 

 

 

00:20:33 - Dr. Blake Bennett

 

Six, $700. Now I go to McDonald's for a family of four, maybe three times. Golly, I think that that was good.

 

 

 

00:20:41 - Mike Mills

 

Yeah.

 

 

 

00:20:42 - Dr. Blake Bennett

 

Another part of the reform was they, like you mentioned, you know, they've got the budget surplus. They attacked the rate as well. And this happened at the state level. They attacked the maintenance and operations part of the school tax rate and forced it lower.

 

 

 

00:20:59 - Mike Mills

 

Okay.

 

 

 

00:21:00 - Dr. Blake Bennett

 

Schools were screaming, hey, you're given more of an exemption, and you. You know, you're gonna. You're gonna lower our rate.

 

 

 

00:21:06 - Mike Mills

 

We're.

 

 

 

00:21:06 - Dr. Blake Bennett

 

We're getting hit from both sides. And they decided that Austin decided to use some of the budget surplus money and push towards these school districts to make them whole.

 

 

 

00:21:17 - Mike Mills

 

Right.

 

 

 

00:21:18 - Dr. Blake Bennett

 

So that it wouldn't be as much pain. I believe that the money's guaranteed. They have enough to guarantee through September 1, 2025. My question is, what happens if we don't have a budget surplus at that time or when we don't have a budget surplus? I don't think it's a matter of if, it's when. What is the plan after that? How are we going to protect these schools? Because, honestly, you know, you look around, if the average home saves between an additional six to 700, $750, think about every single home you're in Mansfield. Think about every single homestead in Mansfield. I've run some estimates. I've run some numbers, and it's. It's cutting into the potential budget of a school district anywhere from three to 7% doesn't sound like a much butter. Well, I estimate for lose about $83 million from going from $40 to $100,000. Dallas, 72 million. You know, you go down south, you get some of your smaller school districts. Marble Falls, about two, 2.4 million. That's a lot of money to lose. That's a lot. And so I think that that's why you saw a lot of school districts lost, school boards starting to scramble. And we did see a lot of bonds this past year on the ballots.

 

 

 

00:22:44 - Mike Mills

 

Yes, I think that's why.

 

 

 

00:22:45 - Dr. Blake Bennett

 

Because they're preparing for what happens when times are not good. And we do have a budget shortfall. So school district, school district, school boards, they're, they're really looking at this, and how are we going to make up that difference? How are we going to still operate? You're seeing cities get involved, you know, changing their tax rate, maybe trying to buy some infrastructure for schools. We're seeing that around. You know, there's creative things that can be done, but nothing comes for free. And these school districts, they're gonna. They are hurting. I can say that.

 

 

 

00:23:23 - Mike Mills

 

Yeah, that was part of the, the thing that I noticed about that whole argument that you, if you kind of read between the lines a little bit, there's this, I guess you would call it like a battle that's going on between the whole public schools in the school choice, I guess, is what they call it, where, you know, the money comes and you can then self direct your money to whatever school you choose, and, you know, depending on what side of the aisle you're on, you're like, oh, that's great. And then the other. But what it's not great is that the school districts that don't have a big budget and don't have wealthy families living in those areas, they're going to suffer the most. And, and then if you start, if you purposefully cut the budgets of these schools, then, you know, people start to say, oh, well, the, you know, the public schools are doing. Going downhill. We can't get good teachers. We can't get good facilities. You know, they don't get new books. This is, I'm going to take my kid and go put them in private school or, you know, whatever the case may be. And, and some people don't have that option. And so it's unfortunate, because I think this seemed like, and I'm. That's why I want your opinion, because you're in. Knee deep in this stuff. It certainly seemed like this whole, which, look, I'm all for lower taxes. I love lower taxes. It's great. But, you know, it also seems like this is a long game to get us to a place, because, you know, I don't know if it's Abbott or who. It seems to be really in favor of this school choice thing, and I think it's not necessarily the best thing in the long term for Texas schools. But that's just me.

 

 

 

00:24:51 - Dr. Blake Bennett

 

I'm. I'm a state government employee. I have no opinion to the part that you're talking about.

 

 

 

00:25:00 - Mike Mills

 

Okay.

 

 

 

00:25:01 - Dr. Blake Bennett

 

I like that. I will talk. I will talk about the. The exemption itself.

 

 

 

00:25:06 - Mike Mills

 

All right.

 

 

 

00:25:06 - Dr. Blake Bennett

 

And we were drowning. We were drowning with the way that property values were going up.

 

 

 

00:25:13 - Mike Mills

 

Yeah.

 

 

 

00:25:14 - Dr. Blake Bennett

 

We need. So we had to have something.

 

 

 

00:25:16 - Mike Mills

 

Yes.

 

 

 

00:25:17 - Dr. Blake Bennett

 

I'm glad we got something. I am. I'm glad that, you know, after. After a couple of set of extended sessions, I'm glad that they came up with something. Absolutely. It did help. We're still. We're still. We're still suffering out here. I can say that. Because property values are still just running wild. Yeah. We did not crash last year. We corrected. But we're still seeing a hot market. We're still seeing multiple offers. You know, they're happening in zip codes. In hot zip codes.

 

 

 

00:25:52 - Mike Mills

 

No, we're, overall, this. This country. Overall, the country's at a 6% growth in 2020 for 2023. I mean, every market's a little different, but, you know, it hasn't. Rates haven't slowed down because we don't have enough homes, so it keeps driving the price up.

 

 

 

00:26:05 - Dr. Blake Bennett

 

Yeah, exactly. Right. And inventory is. Is the big issue. You know, everyone kind of thought, well, you know what? Rates going up, they're gonna. They're gonna slow us down. I think they did a little bit. They helped it. They helped the market. Correct. But that we haven't built inventory. I know that. You know, we've got a lot saying. It's first of the year. They expected seven rate cuts. I thought if we get seven rate cuts, then our economy is. Is in a serious recession. I don't want to see seven.

 

 

 

00:26:36 - Mike Mills

 

Well, okay, real quick on that, since you said that. So. So as an economist. Right. I look at this, and I go, okay, the Fed. Or let's say the BLS.

 

 

 

00:26:45 - Mike Mills

 

All right.

 

 

 

00:26:45 - Mike Mills

 

I'm going to say the Fed. The BLS, who I have less faith in every single day, um, tells us that our unemployment rate is a certain percent, which is relatively low, although it's been ticking up, actually. Even though when you look at people that have left the job market. And then how they count people that are off, still off jobs and haven't come back, and all this other stuff that's. That's there. Then you've got the inflation data that they compile, which, depending on how you measure it, which, by the way, we've changed how we've measured it over the last 30 years multiple times. Like, there's. I've seen multiple things that said, if we measured inflation at the same way we did back in, like, 1984, then we would be at, like, a 10% inflation rate or something like that. But how accurate that is, I don't know. But either way, it seems like they play with these statistics quite a bit to fit whatever kind of story that seems to match what they're looking for. But the downside of that is that everybody thinks the economy is coming along. And yet Jerome Powell, the head of the Fed, is still saying, after inflation, still running a little bit hot, unemployment seems to be still below that 4% mark right now. And he's still saying, we still plan on cutting three times this year, and we're already through the first quarter almost. And so in my head, I go, okay, rates only get cut when the economy is in really bad shape. Typically, you don't see rate cuts when the economy, when the stock market's at all time highs and crypto selling through the roof and real estate at all time highs. And yet here we are, the Federal Reserve telling us that they still plan, even after all this data, to cut rates three times. Now, whether they do it or not still remains to be seen. But why would they keep saying that unless they knew something about something that was coming that nobody else is, or at least the market in general is not picking up on?

 

 

 

00:28:27 - Dr. Blake Bennett

 

Okay, here's my take on it.

 

 

 

00:28:29 - Mike Mills

 

Okay.

 

 

 

00:28:30 - Dr. Blake Bennett

 

Number one, every economics class I ever took in school, we was always taught somewhere between two and 4% inflation is okay. It's acceptable because inflation, yes, is the rise in prices over time, but it also measures how fast the economy is growing. And two and 4% growth is acceptable. Well, if you look at current inflation, we're somewhere in the. In the mid thirties. So why is that not okay? I believe that the Federal Reserve is looking at long term inflation. I think that they're going back before COVID and they're measuring, say, from January of 2019 till present. We've got still an extremely high inflation rate. It's above 23, 24%, meaning prices today are 24% higher than they were in January of 19. If you average that out, we're still above that long term, we're still above 4% per year. I believe that the Federal Reserve is trying to say 2%. We want 2%. And that's why they've been stuck on that number. Because if they can pull. If they can pull inflation, the inflation rate down to 2% and keep it there starting in March for the rest of the year, we would be back down in between that two to 4% inflation, long term average, by December.

 

 

 

00:29:53 - Mike Mills

 

Right.

 

 

 

00:29:54 - Dr. Blake Bennett

 

If it stays where it currently is, about 3.17, it's going to take us until about March of 2025. 2026. I'm sorry, March of 26. Before we get it down into that range, I think they're looking at long term. As far as them saying they're expecting three cuts, I believe what they're looking at is the consumer. The consumer has helped keep the economy afloat through COVID. Because we spent money. We spent a lot of money.

 

 

 

00:30:25 - Mike Mills

 

Yeah, our debt's insane.

 

 

 

00:30:27 - Dr. Blake Bennett

 

Problem is, is. Is consumer debt. We've spent a lot of money on credit cards, credit card balances. I think I saw 4.7% increase in quarter four alone of 2023. The delinquencies are near an all time high.

 

 

 

00:30:46 - Mike Mills

 

Yep.

 

 

 

00:30:47 - Dr. Blake Bennett

 

Then you had forbearance that came in there where we didn't have to pay mortgages, we didn't have to pay on loans during COVID and the federal government was throwing money at us. So just like any good consumer, what did we do? We went out, we bought toys, we bought boats, we bought. We bought new cars. We increased the payment. We use that money to put a down payment down, and we still have that loan. Now suddenly, we're at a point where we forbearance is gone. We got to pay that mortgage again. But we've also got all these toys that we have to pay for and student loans. Student loans. And I believe we're a society that is cash poor but equity rich. I don't see foreclosures being a signal now. Too much equity, too much equity in the home. Forced sales, possibly, yeah. So really what I'm looking for is what? When are we gonna see forced sales, your property taxes and your insurance just going up? Because market values gone up. That could speed along the process. You know, there's a lot of people that either refined or they bought a home during COVID and they've got a 275 or a three for their mortgage rate. And they're saying, I'm going to die in this home. Well, you've also seen property taxes and insurance go up to a point where that monthly payment is, has increased five, six, seven, $800. And so they may be forced to move or at least to sell. And that may be what the Fed's watching. That may be where the Fed's looking is the consumer, the consumer may need a break, because right now we're not just running at the wall. I think we're at the wall as a consumer.

 

 

 

00:32:31 - Mike Mills

 

Yeah, it certainly feels that way. And when you look to, at what they're talking about with unemployment, because, you know, in our industry, in real estate, I always kind of call us the canary in the coal mine because we're one of the first ones to go down when things aren't going great. But then we're also the first ones to turn around a little bit when things are not great because they bring rates down and then that refinances and people, you know, can buy cheaper real estate, et cetera. But when you look at the tech industry and how, you know, with AI impacting it and people getting laid off there in mass droves, well, a lot of those people that got laid off, like right now, I think California's unemployment rate is somewhere almost 6%. And that is primarily because of the tech layoffs that happened just last year. But a lot of those people got six to nine month severance pay. Well, that's a long road, you know, to get to a point where you still have money coming in or you have a fair amount of money, but that money is starting to run out and you start to see consumer spending coming down. Even I read the other day, I don't, my wife and daughter love this store, but I don't unnecessarily go there. But Lululemon, which is a higher end clothing store, has, has actually started forecasting sales coming down because they were a very high level for a long time. But now they're saying, hey, we're having a hard time. And you see companies going bankrupt. There's even Walmart has come out and said, hey, look, our earnings aren't going to be what they are expected. And one of the things you can play with numbers a lot when it comes to earnings and profit and all those kind of things, what you cant mess with is revenue. Revenue is very clear and very direct because its just how much money did you bring in? And when you start seeing those numbers come down, which we have, that really goes to your point of we might be at that wall. And maybe what the Fed is seeing is theyre concerned about, because now that they have the dual mandate of also with unemployment, that if that number ticks up to 4% or 4.1 or 4.2, then theyre going to have a problem on their hands because that could tick, tip things in the other direction pretty quickly. And, and that's maybe, at least from my point of view, just seeing this stuff, you know, when I hear Jerome Powell say they still plan to cut rates, I'm like, okay, well, that tells me that you see something coming that we, you know, nobody else does. And, and then I'm also hearing, which I don't understand, what you can explain to me a little better is stagflation being thrown around quite a bit now. So can, can you explain what stagflation is exactly?

 

 

 

00:34:54 - Dr. Blake Bennett

 

It's, we're stagnant. The economy is, is not, we're not seeing inflation anymore. More, more stagnant. Okay, going back to what you were saying with I'm in the camp right now, I'm going to say we need to prepare for no cuts.

 

 

 

00:35:09 - Mike Mills

 

Really? Oh, yeah. No, I could totally see that as well.

 

 

 

00:35:12 - Dr. Blake Bennett

 

I mean, absolutely kind of leaning towards that completely. I think that the feds, between a rock and a hard place, I think they're looking at long term inflation. And that is one where that suggests we need to stay higher, longer or maybe even go higher. Jobs market starting to normalize a little bit. If you go higher, you're going to hurt the jobs market. You're going to hurt consumers. We really hadn't considered the fact that Japan and China have cut their ownership of bonds by nearly 40%. We're not, we need to find somebody to buy our debt.

 

 

 

00:35:50 - Mike Mills

 

Yeah.

 

 

 

00:35:51 - Dr. Blake Bennett

 

And us consumers, one that can do that. The only way we're going to buy that debt and buy bonds is how we do it. The only way I'm going to pull money out of the stock market and put it into bonds is if I get a better return.

 

 

 

00:36:03 - Mike Mills

 

Right.

 

 

 

00:36:04 - Dr. Blake Bennett

 

Right now, you know, sorry. The rates just not high enough. It's starting to get close. Yeah, but it's a little bit more secure investment. But I mean, we hadn't even, hadn't even thought that direction that if they keep rates high enough, then we start buying bonds. Well, we're buying the government's debt.

 

 

 

00:36:22 - Mike Mills

 

Yes. Yeah.

 

 

 

00:36:24 - Mike Mills

 

Well, somebody's got to buy it because we've been racking it up. But that's another concerning part of it.

 

 

 

00:36:28 - Dr. Blake Bennett

 

You know, that, that's exactly right. And so I, I'm kind of leaning towards, I say prepare for no cuts. Yeah, yeah, prepare yourself. I'm also going to say, you know, you threw out numbers and you threw out states like California, and you, we can throw out Nevada, we can throw out Arizona. We can throw out New York, we can throw out Florida. I'm going to say we're in Texas and Texas. It's different here. Yes, we like that. We like being separate until it comes to maybe our power grid going down during a blast, and then we're not so happy that we've got our own power grid. But we handle economic hardships differently. So hearing problems in California look local. You know, even your major metropolitan areas are impacted differently. Dallas Fort Worth is still seeing a massive number of people that are moving here. And honestly, you have to live somewhere. I mean, you see, you see houses going up everywhere. You see apartments being built everywhere. It's to house everyone that's moving here. And as we see people moving here, that means our growth, our own gross domestic price product in DFW continues to increase. And I can tell you the forecast that I've done and the relationships I've seen between home price is highly correlated with gross domestic product in DFW. So it's forecasted to grow this next year. I see, I see an increase in the, in the price of the homes this next year.

 

 

 

00:38:07 - Mike Mills

 

Yeah.

 

 

 

00:38:07 - Dr. Blake Bennett

 

Houston's. Houston's gross domestic product. The value of everything that they produce highly influences the home price in Houston. Every major metropolitan area is that way.

 

 

 

00:38:20 - Mike Mills

 

Yeah, it's a shame. They, they're, there's a lot of, uh, a lot of messing with numbers sometimes when you have people that are, you know, especially now with the Internet and everybody, uh, posting their thoughts all the time about this big crap like there, although there's going to be a crash, I'm like, with housing specifically because we've been so high. And they keep measuring and there's, there's a, there's a federal, the St. Louis fed does a really good job of putting up different charts on, on, you know, question that you asked. Well, there is a, just general housing, right? And it says units available for housing, and it's higher than it was, you know, even 15 or 20 years ago. And you see folks on Twitter and, you know, I get into little spats with them from time to time because they'll say, oh, you know, we have more supply. And this just means it's all going to come down. I'm like, wait a minute. That is not homes for sale. Those are homes. That, those are units that you can live in. That includes apartments. Anything that you can rent multifamily, that is not properties for sale. And then they'll show our, our new homes. They'll show, well, we're, we're at a higher level of new home builds than we were back in 2008. And you know what? That's true, but that's only because we have so few pre existing homes that are for sale. And they make up, you know, I think it's something like 80% of the market share. It might be closer to 70 now, but they make up such a big piece of the market share that, that individuals, you know. Yeah, there are a lot of units, but those are rentals, most of them. And there are a lot of new homes for sale, but it makes up a small fraction of the market. And that still means we are well, well under supplied. And you can tell, because I just tell people, like, we went through a period of time where we were at seven or 8% interest rates for almost a year, which is the highest that we've seen in 35, 40 years. Right. With home values. The highest they've ever been, and they keep going up. So what does that tell you? That's just basic economics, right?

 

 

 

00:40:08 - Dr. Blake Bennett

 

That's exactly right. It's supply and demand. And I always say in the classes that I teach, give me two numbers and tell me what story you want to say. Yes, I could find a way to say it.

 

 

 

00:40:20 - Mike Mills

 

Yeah. Oh, yeah.

 

 

 

00:40:21 - Dr. Blake Bennett

 

I mean, it's just how do I want to, how do I want to analyze those two numbers? Weed through all of that and what does it actually mean? For instance, during COVID you know, DFW got down to 0.8 months, less than a month of inventory. And in one month's time, inventory increased by a hundred percent. That was the headline that I saw.

 

 

 

00:40:48 - Mike Mills

 

Yeah.

 

 

 

00:40:49 - Dr. Blake Bennett

 

Well, yeah, it went from 0.8 months to 1.6. I mean, we're still extremely low.

 

 

 

00:40:54 - Mike Mills

 

Yes.

 

 

 

00:40:55 - Dr. Blake Bennett

 

What you read, just be careful. Does it make sense? Um, you know, scare news does. Does sell? It really does.

 

 

 

00:41:02 - Mike Mills

 

Yeah.

 

 

 

00:41:03 - Dr. Blake Bennett

 

Um, I don't see it really falling apart right now. I see. Correction. I see, I see a number of sales. Yeah, we're going to probably have less sales in 24 across DFW than what we did in 23. I think we're going to drop by about five to 8% lower. Yeah, I think that that's, that's the influence of rates. I think rates influence that. Then again, you know, you get some people that maybe they, they have to sell because property taxes and insurance. Insurance has gone through the roof, literally. And, and that could throw a kink in that. I expect lower sales this in 2024 that could throw a whole kink in that forecast.

 

 

 

00:41:51 - Mike Mills

 

Yeah, we did a whole show on that as well, the insurance. And while that's going on, because that's another thing that's just gone insane. But so a little bit back on the tax part. A little bit. I, you know, some of this to avoid people from having or not avoid, but to help ease some of this. So I want you to talk a little bit about the process of arguing your taxes. Okay. Because there's kind of two. Two ways to do it. Right? There is the I'll do it by myself. I'll go in there and I'll, you know, bring my. Whatever, my contract, whatever your comps, whatever you think you're going to do. You're going to go to the office, try to do your thing, and then there's the other. I'm going to pay somebody to do it. Now, I'll tell you, from. From. I've been, you know, been in this business. My wife's a realtor. We've been doing it for 15 years. And I pay a guy every single year in Tarrant county to go argue my taxes. And what I tell people is, and you can correct me here, this is just what I say. I'm like, look, this guy that I pay, let's call him Bob, okay? Bob knows Jane, Susie, Mills, Louise, you know, Ralph, all at the tax office because he used to. Because Bob used to work there. And Bob goes in with his stack of clients, and Bob says, hey, I need you. I need this value for these. Here's the reason. They're like, cool, sounds good, you know, blah, blah, blah.

 

 

 

00:43:05 - Dr. Blake Bennett

 

All right.

 

 

 

00:43:05 - Mike Mills

 

Well, I've lived in my home now for almost. Not quite ten years, about eight. Eight years. I bought it prior to 2019. And my value for what I bought my house might be somewhere in the neighborhood of less than 10% more than what I paid for it in that period of time because of this. This individual, which is fantastic, so probably shouldn't even be talking about it. But either way. What. How does that process work typically, and what do you recommend if people want to argue their value?

 

 

 

00:43:35 - Dr. Blake Bennett

 

Okay, well, I can tell you this. I've got some very good friends at the appraisal districts myself. Go to lunch with them. I've argued and I protested three times in my life. I've only won once. Right. I've walked away the other times with tail between my legs. No decrease whatsoever.

 

 

 

00:43:53 - Mike Mills

 

Yeah.

 

 

 

00:43:54 - Dr. Blake Bennett

 

The two times that I lost, I took comps in. That's, you know, it's the first thing I thought, I'm gonna get comps and take them in, and I'm gonna argue the appraisal districts ready for comps. What I found to be successful is whenever I'm going to go, if you and I are next door neighbors, I want to prove, because they can't come into the house, they're not going to come in whenever they're valuing the property. I'm really not arguing against the appraisal district. I'm arguing saying, your house, Mike, is the average house. I'm below average.

 

 

 

00:44:28 - Mike Mills

 

Right.

 

 

 

00:44:29 - Dr. Blake Bennett

 

Here's why. And so I'm going to show pictures of maybe some, some problems with the back porch, you know, the concrete starting to buckle or tree roots have grown up underneath, or maybe there's some tiles falling out, falling off of the pool. And I'm going to get estimates on how much it is to fix that. And that's what I'm taking in. Whenever, whenever I've gone in, I've sat down in front of the board and my buddy is going up against me and we're betting lunch on who's going to win. And I had to pay twice, and I've only gotten much bought once. So, you know, the average person really, I mean, I don't know how to, how to argue it as well as, say, bob, that you hire absolutely right. They know the steps to take and how to really argue it. I can tell you a lot of times whenever I'm asked, the first thing that I do, I don't look at what is the value that you put on the structure. I want to see what is the value you put on the lot, on the dirt itself. Because I've seen some big discrepancies in neighborhoods on the value of the lot itself. And if you're going to discount the dirt and you and I have the same size lot, why that? And it's not really going in and getting upset at them. It's more. Can you explain why this is such a different price?

 

 

 

00:45:54 - Mike Mills

 

Right.

 

 

 

00:45:55 - Dr. Blake Bennett

 

And that is, that is one tactic. Now, I'm also going to fall on, and a lot of people are not aware of this, but the appraisal districts, and I've gotten on to them for this because they don't tell the public. Did you know that the appraisal districts are audited every two years for the price that the value that they give property in the entire district, they're not the contrary.

 

 

 

00:46:24 - Mike Mills

 

Yep.

 

 

 

00:46:24 - Dr. Blake Bennett

 

And if they're off by 5%, either over or under, they're given a warning and they get a visit the next year, if they're off again by 5%, they get a second warning and they get a third visit. If they're off again that third year, a couple of things are going to probably happen. Number one, the chief appraiser is probably going to find, have to find a new job. And schools within the county, all school districts within the county start losing funding.

 

 

 

00:46:53 - Mike Mills

 

Wow. Really?

 

 

 

00:46:54 - Dr. Blake Bennett

 

And so that kind of takes a little bit of the steam out of. We want to be so mad at the appraisal district. Look at the value you're, we really want, we need them to be dead on with their appraisals.

 

 

 

00:47:05 - Mike Mills

 

Yeah.

 

 

 

00:47:06 - Dr. Blake Bennett

 

Because if not, our school starts suffering. Well, okay. Now what do we do? Who do we get mad at? I, I say we need to hammer those, those rates lower. Yeah, that's, that's really where I would focus a lot of attention is the rate needs to be lower. The rate. The rate. The rate. Because again, your property taxes are. Value, taxable value.

 

 

 

00:47:28 - Mike Mills

 

Yeah.

 

 

 

00:47:29 - Dr. Blake Bennett

 

Rate. And that's what, that's what determines your.

 

 

 

00:47:33 - Mike Mills

 

Well, I've heard, and I don't, I haven't really dug into this too much. I've just seen it in a couple spots, different articles and stuff. And you never know, you know, because it's the Internet, so who knows? But, but I've seen where, if there's, there's a threshold and I don't know exactly where it is, but, like, if you compare California to Texas and their state income tax versus our property tax, that once you get below a certain income level, that it actually starts to swing in our direction in the negative that you're paying more in taxes to some extent for your property than you would in state income tax if you lived in California. As much as we villainize, look, I'm not a fan of California, but, but, you know, as much as we villainize their state income tax, and we've championed the fact that we don't have one, I've seen a couple of people argue the point that once you get to a certain income level, which is more people than not, that that property tax amount actually impacts you less. Now, obviously, I guess with renters it wouldn't be as big of a deal, but they're, they're still paying for it because the landlords are, you know, passing that on. So do you, do you, have you heard that or do you agree with that?

 

 

 

00:48:35 - Dr. Blake Bennett

 

I've seen it. I've been asked by some people that were potentially looking at moving here to estimate what is the property tax? You know, because they couldn't get kind of a straight answer. They wanted to see what, what are our estimated property taxes? The last one that I did was for a couple that were retired, and they were living in a $1.6 million house in California, and they were looking at moving to Texas in the metroplex, because children were here and grandchildren were here. So they were going to cut the value in half. They were taking a lot of equity out of California, and they were going to buy about an $850,000 house here, the location where they wanted to put in an offer. I estimated their property taxes going to be about 25,000. They got quiet on the phone and said, that's a lot more than what we were thinking. And they said, you know, your property taxes are definitely high, and us, just like any good texan, I said, but we don't have a state income tax. And their response was, we're retired. Our state income tax total for property taxes for them, plus state income tax last year was about $11,000 total.

 

 

 

00:49:54 - Mike Mills

 

Wow.

 

 

 

00:49:55 - Dr. Blake Bennett

 

For them now, they were retired, so I was going, I don't know, as a good texan, how I defend my state now, you know? So, yeah, there's certain situations and certain thresholds where absolutely. It's going to be, going to be cheaper to have that state income tax. Sure. It will going to be other situations where. No, it's not.

 

 

 

00:50:18 - Mike Mills

 

Yeah.

 

 

 

00:50:19 - Dr. Blake Bennett

 

You know, it's, it's all over the board.

 

 

 

00:50:22 - Mike Mills

 

Just.

 

 

 

00:50:22 - Dr. Blake Bennett

 

So tell me how you want to argue it, and then we can find the demographic that support your argument.

 

 

 

00:50:29 - Mike Mills

 

Give me two numbers, and I'll. I'll tell you. Yeah, I'll tell you what you want to hear.

 

 

 

00:50:33 - Dr. Blake Bennett

 

Tell me what you want. Tell me what you want to hear.

 

 

 

00:50:35 - Mike Mills

 

So, so speaking of the, the old folks out there, not to, you know, any, the over 65 folks, we, we talked about this very, in the very beginning.

 

 

 

00:50:44 - Mike Mills

 

Some of us.

 

 

 

00:50:45 - Dr. Blake Bennett

 

Some of us might be getting closer to that.

 

 

 

00:50:47 - Mike Mills

 

Yeah. Every day.

 

 

 

00:50:49 - Mike Mills

 

I'm not that far off, by the way. I'm not too far off. I'm 45, so we're not that far off, but I'm closer to it than I was the other side of it, so that's, that's for sure.

 

 

 

00:50:58 - Dr. Blake Bennett

 

I'm not, I'm nine years closer than you are.

 

 

 

00:51:00 - Mike Mills

 

So.

 

 

 

00:51:00 - Mike Mills

 

Yeah, yeah, yeah, we're getting there. Hey, look, we have something to look forward to.

 

 

 

00:51:03 - Mike Mills

 

So.

 

 

 

00:51:04 - Mike Mills

 

So, okay, I want you to talk about this, this little. We'll call it a tax hack. Okay? So if you're, if you're over 65 or getting there, okay. This is a great way for you to really save money on taxes. And it's completely legal, correct?

 

 

 

00:51:21 - Dr. Blake Bennett

 

Absolutely, it is.

 

 

 

00:51:23 - Mike Mills

 

There's nothing wrong with this.

 

 

 

00:51:24 - Dr. Blake Bennett

 

And you can. It's on the comptroller's website.

 

 

 

00:51:28 - Mike Mills

 

Yes.

 

 

 

00:51:29 - Mike Mills

 

So. But I don't think very many people understand this. And you can actually plan, if you know this little trick, you can actually plan for your retirement pretty effectively and. And save a dramatic amount of money on any kind of property taxes and live, oh, by the way, in a really nice home. So. So explain how that works exactly.

 

 

 

00:51:49 - Mike Mills

 

Okay.

 

 

 

00:51:50 - Dr. Blake Bennett

 

Well, number one, your homestead, in the year that you turned 65, your homestead, the value of that homestead is frozen. And so it does not move. The tax rate can change, but the homesteads value is frozen now. And I don't know why, but my Google. Hey, Google, stop. I don't know why my Google assistant was going on.

 

 

 

00:52:19 - Mike Mills

 

They heard you. You were going to comment on the school taxes, and they were like, what were you. What are you going to say, Blake?

 

 

 

00:52:26 - Dr. Blake Bennett

 

So anyway, the value of your home freezes in the year that you turn 65. Market value keeps going up, but you're frozen. So the longer you stay in the home, the more the market goes up. You've got a percentage savings. You would be paying market value, property taxes, but you're not. You're frozen down here. So you've got a percentage savings. Now you decide to move that percentage savings, you can move and transfer to your new home. So if you're saving 35% in school property taxes on the home you're living in, you move into a new home, the market value will be dropped by 35% and frozen there. And so key is you have to be moving one Texas residence to another, and you have to ask for it. A lot of people don't know about this, about this, this transfer of percentages. You will go to the appraisal district where you're moving from, tell them you're moving, and tell them you need the transfer certificate. You move into the new home, update your driver's license, and give the new appraisal district your transfer certificate in your.

 

 

 

00:53:37 - Mike Mills

 

So it's a percentage, not a value, right?

 

 

 

00:53:40 - Dr. Blake Bennett

 

Exactly right. Yes, it is a percentage. And yeah, there's, there's some counties in Texas where the median home price is, is less than the total number, total amount of exemptions that we get. Because remember our school property taxes, we're getting $100,000 now. Exemption. That means you take the value of your home, subtract off $100,000 immediately before you calculate property taxes. You get an additional $10,000 for being over 65. So if you happen to be lucky enough to live in a home that's valued under 110,000 by the appraisal district, yeah. You've got more exemptions than you do value. So the value for calculating school taxes is $0. So.

 

 

 

00:54:28 - Mike Mills

 

So, all right, so let's say that scenario. So let's say. Let me. Help me understand. So if I. I live in my house right now, like, the house that I have here, and then let's say I buy a house in West Texas, that's like 150 grand, okay? And I just. Tomorrow I rent it out. I buy it. I'm still living where I'm at, right? I'm 45, I got some time. I buy that house, I'm renting it out to somebody else. When I turn, let's say 62.

 

 

 

00:54:54 - Mike Mills

 

All right?

 

 

 

00:54:54 - Mike Mills

 

Because I'm going to do a little earlier, I turn 62, I decide to move to that house and take my homestead there. Okay. And then apply my homestead, apply my over, or, you know, stay there till I'm 65, obviously, I'm gonna live there for three years, take my over 65, and then after that, I decide to move either back to where I'm at now or somewhere else. Okay, so in that scenario, am I. How much of a percentage am I taking with me when I go?

 

 

 

00:55:22 - Dr. Blake Bennett

 

Okay, so what did you say the value was whenever you. Whenever you declare homestead, Texas?

 

 

 

00:55:29 - Mike Mills

 

Let's say it's 200,000. Just for easy.

 

 

 

00:55:32 - Dr. Blake Bennett

 

200,000. How much did the market go up from the time that you turn 65 until you moved back or moved to East Texas?

 

 

 

00:55:44 - Mike Mills

 

So let's say I moved to there, and I at 62, and I bought it for 200,000. And let's say by the time I turned 65, it was worth 215.

 

 

 

00:55:54 - Dr. Blake Bennett

 

Okay, so it's 215. You're going to freeze it to 15. Now, how much is it going to go up from the time that you freeze it? How much is it going to go up till you move? Is it going to go up? 10%? Is it going to go up twelve?

 

 

 

00:56:09 - Mike Mills

 

Let's say ten, then.

 

 

 

00:56:10 - Dr. Blake Bennett

 

Then you'll get to move that 10% with you.

 

 

 

00:56:13 - Mike Mills

 

Okay, so what it is then is the. Once you turn 65, okay, that freezes, and then the percentage that the house increases after you turn 65, that percentage you take with you wherever you move.

 

 

 

00:56:29 - Dr. Blake Bennett

 

Yes, exactly. Right.

 

 

 

00:56:31 - Mike Mills

 

So if your home appreciates by 30% again after you turn 65 and it's frozen, so you're not taking the value, you're just taking the percentage of the difference in the value.

 

 

 

00:56:41 - Dr. Blake Bennett

 

Yes, exactly. Right. And anybody that turns 65 in the last three or four years, they have got a massive percentage savings right now already built up. Even if you turn 65 in 2020, imagine how much of a massive buildup you already have.

 

 

 

00:56:59 - Mike Mills

 

So if I was at my house now and I turned 60, if I stayed here for another 20 years, I turned 65 living here.

 

 

 

00:57:05 - Mike Mills

 

Okay.

 

 

 

00:57:05 - Mike Mills

 

And I had my 10% cap that I've had since I've been here. And let's say I've keep arguing my values and held it down. And let's say that the difference between what my taxable value is versus what my actual market value is is 40% when I turn 65. I take that with me.

 

 

 

00:57:24 - Dr. Blake Bennett

 

The market value is what freezes.

 

 

 

00:57:26 - Mike Mills

 

Okay. Gotcha.

 

 

 

00:57:28 - Dr. Blake Bennett

 

So on the year that you turn 65, your market value freezes, but the.

 

 

 

00:57:32 - Mike Mills

 

Market value according to the county.

 

 

 

00:57:34 - Dr. Blake Bennett

 

Yeah, exactly. And so if your taxable value, if you're still working off a 10% increase, it can keep going up until it hits that, that frozen market value.

 

 

 

00:57:46 - Mike Mills

 

So the true benefit then in this is being in your home when you're 65, and then the market appreciating relatively dramatically in a three to five or six year period or whatever, and then moving after that, because that's when you're going to get the biggest benefit.

 

 

 

00:57:59 - Dr. Blake Bennett

 

The key is, is homeownership in the year that you turn 65.

 

 

 

00:58:03 - Mike Mills

 

Gotcha. Okay.

 

 

 

00:58:04 - Dr. Blake Bennett

 

Absolutely.

 

 

 

00:58:05 - Mike Mills

 

That makes sense.

 

 

 

00:58:06 - Mike Mills

 

Okay. Very good.

 

 

 

00:58:07 - Mike Mills

 

Well, I mean, look, it's a, any way that you can, especially when you get into retirement age, if you're on fixed incomes or you're living off your retirement, you know, not know if we'll see if Social Security is around. I mean, they keep saying it's, it's gonna, I mean, what I also, they kept, you know, I think when I was growing up, they said it'd be gone by now, but it's still there somehow. I don't know how, but we'll see if that's even existing by the time we get there. But, but either way, fixed incomes, once you get to a certain age, people are living longer. You know, these are big, these are big benefits, you know, and, and truly, you know, I think people with, just looking at lifespan, I mean, you, you know, nowadays, people are living quite a bit longer with healthcare and everything that's working out. And when you're, you know, we talk about retiring at 65, I mean, look, you're nine years away from it. Are you, or, you know, or less, you know, do you see yourself, quote, retiring like, just playing golf every day when you're 65 years old.

 

 

 

00:58:59 - Dr. Blake Bennett

 

As long as I'm enjoying it, as long as I'm having fun and, you know, the people keep it fun, I'm gonna keep going. Yeah, I'm gonna keep going because I enjoy it.

 

 

 

00:59:08 - Mike Mills

 

Yeah, exactly. So, you know, it's.

 

 

 

00:59:11 - Mike Mills

 

It's.

 

 

 

00:59:11 - Mike Mills

 

It's always big savings whenever or a helpful thing, especially for older folks. You know that having these rules in place in this. In the state, is this unique to the state of Texas, or is this other places?

 

 

 

00:59:21 - Dr. Blake Bennett

 

I've. I've got my hands full keeping up with the state of Texas and everything that on here. I haven't even looked outside of Texas. Yeah, I do know that. You know that rule as far as transferring the percentages, it can only be one Texas residence to another.

 

 

 

00:59:37 - Mike Mills

 

Yeah.

 

 

 

00:59:38 - Dr. Blake Bennett

 

It applies for school districts across the state. So if you're moving from. From Amarillo to Beaumont.

 

 

 

00:59:44 - Mike Mills

 

Yes.

 

 

 

00:59:45 - Dr. Blake Bennett

 

You can do the transfer for school tax purposes within a county. If a county recognizes the freeze, they don't have to, but if they do and you stay within the county, then you can transfer for county tax purposes, as well.

 

 

 

01:00:00 - Mike Mills

 

Wow.

 

 

 

01:00:01 - Dr. Blake Bennett

 

If it's within the city and the city recognizes it, the freeze, you can transfer within, you know, your percentages for the city, as well.

 

 

 

01:00:10 - Mike Mills

 

Yeah.

 

 

 

01:00:10 - Dr. Blake Bennett

 

But, again, schools, it's mandatory anywhere in the state of Texas that you move.

 

 

 

01:00:15 - Mike Mills

 

Well, it's. I think it'd be a big benefit, too, if you're older and you're downsizing, because if you're downsizing from where you were to the new place, your taxes are already going down because you're having less of an expensive home, and then you're also carrying over that exemption, and you're carrying over the frozen percentage that you get to keep it. So that's where the true benefit comes in play.

 

 

 

01:00:33 - Dr. Blake Bennett

 

Exactly right. Yes, absolutely. And my mother, whenever she retired, she moved to the metroplex to be closer from West Texas, and so she actually upsized. And I can tell you that had this. Had this option not been available, my mother would have likely not moved. And, you know, she's at the age where she needs to be close.

 

 

 

01:00:57 - Mike Mills

 

She.

 

 

 

01:00:57 - Dr. Blake Bennett

 

And she wanted to. She wanted to see my children, you know, in the last years that they were in high school, and them to just drive out and have lunch with her.

 

 

 

01:01:07 - Mike Mills

 

Yeah.

 

 

 

01:01:08 - Dr. Blake Bennett

 

It would have taken 5 hours to get to her otherwise, or it did whenever she lived in west Texas. So now my children were able to just drive out and have. Have lunch with their grandmother, which was great.

 

 

 

01:01:19 - Mike Mills

 

Yeah.

 

 

 

01:01:20 - Dr. Blake Bennett

 

That. That little catch that, that rule enabled my mother to move to the metroplex and live, not just live down here.

 

 

 

01:01:29 - Mike Mills

 

Yeah.

 

 

 

01:01:30 - Mike Mills

 

No, that's awesome. Well, Blake, we're at an hour. It goes by quickly.

 

 

 

01:01:34 - Mike Mills

 

So.

 

 

 

01:01:34 - Mike Mills

 

But I really appreciate all your information, man. And, you know, like I said in the very beginning, nobody ever likes to talk about taxes but you, you know, we have to understand how they work. We have to understand the mechanics of it. You know, when these taxable values go up, you know what can affect it, especially when you're buying a home. To understand all my taxes going to go up in the next twelve to 24 months, you need to ask these questions as a realtor. You need to ask these questions of the lender. You need to look for yourself to see what the actual taxable value is. You know, I often, whenever agents will send me listings like here's what the taxes are, I say look politely, I'm going to go look them up myself because I don't, you know, because they don't look for the exemptions. You just go and looking for that amount. You see that, oh, this tax is only $2500 on this $500,000 house. And you're like, well, that's because they're.

 

 

 

01:02:20 - Dr. Blake Bennett

 

There'S a reason why.

 

 

 

01:02:21 - Mike Mills

 

Yep.

 

 

 

01:02:22 - Mike Mills

 

Yeah, exactly.

 

 

 

01:02:23 - Mike Mills

 

Yeah.

 

 

 

01:02:24 - Mike Mills

 

So you just have to know all these things and you have to do your due diligence and, you know, and it's, it's something that is going to save you money in the long term, but if at minimum, it's going to be able to set your expectations on what's coming so you don't get blindsided by these big, these big Millss and. You ready?

 

 

 

01:02:40 - Dr. Blake Bennett

 

Absolutely. Right. Don't, don't get caught off guard. You know exactly what, what it is. So I couldn't agree more.

 

 

 

01:02:48 - Mike Mills

 

Well, Blake, thank you so much. Anything else you wanted to say? Anything before we roll out of here?

 

 

 

01:02:52 - Dr. Blake Bennett

 

You bet there is. I love your shirt. You wear that in the honor of opening day.

 

 

 

01:02:57 - Mike Mills

 

That's right.

 

 

 

01:02:58 - Mike Mills

 

Day today.

 

 

 

01:02:59 - Mike Mills

 

It's time for some baseball.

 

 

 

01:03:01 - Mike Mills

 

Now.

 

 

 

01:03:01 - Mike Mills

 

Now if I could just figure out how to watch the damn thing without having to subscribe to freaking time cable or DirecTV. I'm so, the most frustrating thing, I can't even tell you. And I don't know how there's not a bigger uproar about it because I haven't had cable or satellite for like five or six years. Like I use YouTube. I would pay, I would pay bally sports. I would pay them $25 a month or whatever it is. So I could just watch the Rangers in the Mavs and I can't. And it's, it's the most, I keep my, to a minimum on that statement.

 

 

 

01:03:37 - Mike Mills

 

Yes.

 

 

 

01:03:37 - Dr. Blake Bennett

 

I mean, we could go for another hour if you want to keep.

 

 

 

01:03:40 - Mike Mills

 

Yeah, keep on.

 

 

 

01:03:42 - Mike Mills

 

No, it burns me up, man. It burns me up. But, but yes, it is baseball time again and I'm super excited. I've, you know, been a Ranger fan since I was a little kid and last year was like the best year ever, you know, going through that, that run. And I can't wait. Like I haven't been so excited for baseball in so long. So I'm, I'm stoked and yes, I will be, I won't be at the game today because I've got children and they have practices and all that fun stuff, but I will be sitting on a baseball field with my phone watching. So that's where I will be.

 

 

 

01:04:12 - Mike Mills

 

Or.

 

 

 

01:04:12 - Mike Mills

 

Well, actually, no, never.

 

 

 

01:04:13 - Mike Mills

 

No.

 

 

 

01:04:13 - Mike Mills

 

It is a nationally televised game today, so I get to watch this one. The rest of them I don't get.

 

 

 

01:04:17 - Dr. Blake Bennett

 

To do exactly right. But you know what? It's the greatest time of the year. It's greatest.

 

 

 

01:04:23 - Mike Mills

 

That's right.

 

 

 

01:04:23 - Mike Mills

 

I agree.

 

 

 

01:04:25 - Dr. Blake Bennett

 

Everybody has a shot today.

 

 

 

01:04:27 - Mike Mills

 

That's right.

 

 

 

01:04:28 - Mike Mills

 

Yeah. Yes, it does.

 

 

 

01:04:29 - Dr. Blake Bennett

 

We got a good shot for the.

 

 

 

01:04:30 - Mike Mills

 

Rest of the year, too. So I'm not, I won't be depressed come may like I usually am. So I'll be, it'll be good. All right, Blake. Well, I appreciate it, man. Thanks for hopping on with me and thanks for everybody that stuck around. And I will be back next week. We are going to be doing a little bit of AI talk regarding how to, you know, with all these commissions changes that have happened in the real estate industry, you know, streamlining your processes and making things a little less expensive and handling certain steps along the way is going to be a big benefit. And great news is there's an incredible technology that can do it all for you and we're going to talk about that next week. So everybody have a great weekend and go rangers, and I'll see you next time.