This is kind of a stupid question because you can just do the math yourself, but maybe there is something that I haven't thought about.

Let's say in a hypothetical scenario that you have two nearly identical homes in nearly identical neighborhoods/school districts/etc., but one has a property tax rate that is 0.5% higher than the other. Is there standard way to take that into account when comparing the prices of the homes? Is the market even remotely efficient when accounting for differences in property tax rates?

I'm guessing no.

Probably pretty inefficient, but likely is somewhat priced in because there are tax estimates that are considered on listings and mortgage calculators and things. But likely not accurate when the appraisal is way off or the seller's exemption is large.

0.5% is also a big difference differences that large from relatively close by properties will be like one house is in the city limits and the other is not, or theres some kind of difference in utility districts etc that probably should also affect the value of the property based on the difference in the service levels between those jurisdictions as well. Truly similar properties very close to each other in very similar districts will likely not have such a large difference in the tax rate.

Yeah I was just browsing Zillow and trying to factor in MUD vs. "regular" districts when looking at prices.

Here's how an institutional investor may look at this…

Determine the additional amount you're paying in taxes for the higher-tax rate home.

Then use Excel to calculate the Net Present Value of these cash flows over thirty years, employing a discount rate equal to your mortgage rate.

The reason for using the mortgage interest rate is that you're opting for additional tax expenses over quicker mortgage repayment. Therefore, it represents an opportunity cost of paying more in taxes rather than reducing your mortgage.

The Net Present Value calculation would quantify how much the house with a higher tax rate should be discounted.