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I'm hoping someone here may have some knowledge or experience with this question....
My husband and I are looking at buying a home in Lancaster, in town. We really like the historic townhouses in the city and see that quite a few have had recent upgrades/improvements. I understand the pitfalls of too-quickly flipped houses, superficial improvements instead of deep system upgrades, and all of that. We know what to look for there, but honestly we are transitioning into retirement and are not interested in doing all those upgrades ourselves. I'm willing to pay the higher price where someone else has already done that work for us.
The big question we've got at this point is what happens to the property taxes when the current tax is based on a home's previous, pre-improved assessment. I'm trying to find out how much we can expect it to go up when it's reassessed, when the market value is considerably higher.
Our real estate agent has been trying to find out. She called the assessor's office this morning to find out what the formula is, the timing, and anything else she could. Weirdly, they told her there is no formula. They also said re-assessments have normally been done about every 8 years, but talk around the office is that it will be much sooner next time, likely in 2023... although that's not certain.
Our agent says there is a formula for new construction, based on land price and market rate for the new house, but using that formula flipped older houses in the city would see increases that are anything from 2.5 to 3 times their current tax rate. That seems like such a radical change that it couldn't be correct, but the assessor's office suggested to her that she use that new construction formula anyway so she'd have her "worst case scenario."
This is all a bit frustrating, that there's so little real information. No formula? How can there be no formula? How subjective is this? One house we're looking at seriously has a current property tax of ~$3200. That is based on the assessment from a few years ago when it was unimproved and had a much lower market value than the renovated house now has. Using the 'new construction formula' in order to predict what a property tax increase might look like at the next assessment it comes out at ~$10,000. Holy cow. Now that's an increase! And honestly high enough that we would not consider buying the house.
So... anyone know of others who've bought renovated properties in the city at much higher prices than the pre-improved home value? What has happened to their tax rates when reassessed?
Last edited by Jessie Mitchell; 06-08-2020 at 10:01 AM..
The assessments take comps into consideration so your property is likely not going to reach the higher taxes of a new build. That said reassessments can be horrendous when they do happen (ie Lebanon County 2017)
Response:
This is surprising to visitors who travel through the state. Why do so many homes look run down, so depressing looking in so many areas?
Answer?
Reassessments are mostly made from the outside of the home......a dilapidated looking home can't scream out increase!
Some have moved to only beautifying the insides of the home to thwart property tax increases.
It is terrible when interior of homes are being displayed on real estate sites.Gives the accessor all the information he needs for future billing.
Realtors don't care. They are out to only sell the home.....you will be banged out for the increase a few years down the road.
Rethink about buying a home that has its interior renovations posted on line...or better yet Stick with an old home. Pay for renovations.
Move in after work is done and by all means.......Keep the pictures of the interior off the internet.
The taxes in Pennsylvania in some places are higher than some of the outer boroughs of New York City...............simply crazy...
Interesting! The thing about online photos of interior renovations that's a little unfair is that these real estate photographers are really good at making a place look high value. We've toured a lot of renovated homes in the last few weeks and quite a few of them look a lot nicer in the pics than they do in real life. Also, the pics don't capture the soft floors, the ill-fitted doors, the raggedy corners. But, thanks for the heads up on the photos online. We're in the process of purchasing a place now. I see on the major real estate listing sights you can "claim" a property you own and remove all the photos. Once we actually own it, I will definitely do that. This one won't be invisible as a renovated property because the outside does look a lot nicer than it used to, plus nicer than many surrounding homes, and it will be easy for an assessor to see it sold for much more recently... but at least they don't need access to all those photos! Especially because the way the house is staged and photographed makes it look a lot fancier than it will when we move in with all our old stuff.
Interesting! The thing about online photos of interior renovations that's a little unfair is that these real estate photographers are really good at making a place look high value. We've toured a lot of renovated homes in the last few weeks and quite a few of them look a lot nicer in the pics than they do in real life. Also, the pics don't capture the soft floors, the ill-fitted doors, the raggedy corners. But, thanks for the heads up on the photos online. We're in the process of purchasing a place now. I see on the major real estate listing sights you can "claim" a property you own and remove all the photos. Once we actually own it, I will definitely do that. This one won't be invisible as a renovated property because the outside does look a lot nicer than it used to, plus nicer than many surrounding homes, and it will be easy for an assessor to see it sold for much more recently... but at least they don't need access to all those photos! Especially because the way the house is staged and photographed makes it look a lot fancier than it will when we move in with all our old stuff.
Did you end up buying a home in Lancaster city?
I've noticed what you have as well, which is the pictures (Esp when done by Berkshire Hathaway) look much better on Zillow then when you actually go to the home to see it for yourself. Berkshire is the master at making their photography skills to enhance the look of the property, esp with backyards and the look in the picture vs the actual size of the yard.
Also, flipping is really popular in the Lancaster area, and you'll see many inexpensive flips in this area. Most flippers do not want to make the necessary changes/upgrades to justify the selling price of the home compared to what they originally bought it for. But since the real estate market is so hot here, people are still buying these flipped homes. I would really look into the price history of the home and compare the price they paid vs the current selling price and ask the agents what upgrades were made to justify the price increase.
Response:
This is surprising to visitors who travel through the state. Why do so many homes look run down, so depressing looking in so many areas?
Answer?
Reassessments are mostly made from the outside of the home......a dilapidated looking home can't scream out increase!
Some have moved to only beautifying the insides of the home to thwart property tax increases.
It is terrible when interior of homes are being displayed on real estate sites.Gives the accessor all the information he needs for future billing.
Realtors don't care. They are out to only sell the home.....you will be banged out for the increase a few years down the road.
Rethink about buying a home that has its interior renovations posted on line...or better yet Stick with an old home. Pay for renovations.
Move in after work is done and by all means.......Keep the pictures of the interior off the internet.
The taxes in Pennsylvania in some places are higher than some of the outer boroughs of New York City...............simply crazy...
Actually, "simply crazy" is an accurate definition of your mind blowingly clueless misunderstanding regarding taxes in a state you don't even live in.
First, your concept on why areas of the state look a bit "run down" is absurd. Most rural areas, small legacy towns, and rough parts of larger cities that suffer from blighted housing here in Pennsylvania, are in a continual economic decline. The majority of these areas were thriving in the good times of long gone extraction industries, like coal and timber, or when America was booming from it's long deceased manufacturing base. People that live there tend to struggle to make it, in many cases, and their housing can reflect that fact. As a lifelong state resident and professional home builder, renovator and investor, I have literally NEVER met a soul here who decided that they were going to "outsmart" the tax assessors office by living in a place where the exterior is intentionally allowed to deteriorate to keep the taxes low. First, most people don't even think like that. Second, the tax system doesn't work that way.
In a lot of rural areas, smaller, villages, and even suburbs in some cases, real estate taxes can be pretty cheap here. It's actually quite easy to move to a rural area like northcentral PA, find a decent home under $100K and pay LESS that $1000 a year in real estate taxes. The reason is simple. Pa real estate taxes are a function of the degree of local and county services provided (local police, library system, local road maintenance, size of government, etc) and most rural areas provide far less services that the more populated regions do. The other, and larger factor is the number of school students the local community needs to pay to educate AND what totally unfair percentage of the total cost of that child's education will be covered by the state. Sadly, for complex political reasons, the further you get from places like the Poconos, or other areas of exponential growth, the more likely it is that the state will be covering a much, much bigger portion of the education bill in your neighborhood. You can literally live in Monroe County in the Poconos, and pay 8-10X as much real estate taxes as somebody with a similar dwelling in a remote county, with few children in school, like Elk, Adams, Potter, etc. The more remote school systems are far, far smaller, cheaper to operate, and have a huge portion of their funds coming right from the state.
Your concept of how a reassessment works is comically bizarre. A county appraiser might spend all of two minutes on the street in front of your home, and take a few pictures. They are looking to determine that they have accurate info. on file and that they didn't miss improvements or additions. They value the home based on the facts they have, making reasonable assumptions. Your home is listed as 1500 sq. ft with a fireplace, hardwood floors, central air and an inground pool, on the tax rolls? Well, it's going to get a higher value that one down the street that's 1400sq ft. with carpet, no fireplace, no pool and window ACs. The fact that the outside needs to be painted, and the grass is 8" high, doesn't mean a thing. Nobody is hunting for old pics. on zillow, nobody is dropping the value by tens of thousands since you let get blighted, chances are it wasn't worth much in the past, and will never have a huge tax bill, even after the reassessment. I've seen people get cute with things like trying to claim that they have unfinished space, typically in cape cod style places with nothing upstairs yet, or bi-levels with nothing completed downstairs yet, trying to claim that a garage addition can't be taxed since it's unfinished, with no concrete floor yet, or building un-permitted additions that nobody will notice. The assessor just assumes that you are trying to screw the system, records the facts, and lets you fight it later.
Basically, they system works nothing like you believe it does, the county knows everything it needs to based on documents it has, and your claim that it's a bad idea to buy a home that has pic. of the outside available online is absurd. This might be bit of a shock, but in a situation like the OP is asking about, the work of the flipper was fully permitted, and inspected by the city's building department. The city already knows exactly what features and specifications are located inside the new renovations since they were paid to review the proposed project, issue a permit, and inspect the work in progress. They also often already have photos of the exterior, since they have photos of every exterior in the city, can get them easily online, or a quick trip to the property. It can be shocking to learn how competent some of these counties are. I have a rural place in the deep south, in a very low cost, backwoods area. I can go to the county assessors office, and view pictures of my property from 1987 on. Pretty hard to scam a tax office by saying that you don't need a building permit, since that part of the home was there when you bought it twenty years ago, when they have photos that prove you are lying, eh? The fact that anything shows up on a real estate website, interior or exterior pics, descriptions, etc. is absolutely meaningless to the tax assessors office. Chances are they already know.
I've noticed what you have as well, which is the pictures (Esp when done by Berkshire Hathaway) look much better on Zillow then when you actually go to the home to see it for yourself. Berkshire is the master at making their photography skills to enhance the look of the property, esp with backyards and the look in the picture vs the actual size of the yard.
Also, flipping is really popular in the Lancaster area, and you'll see many inexpensive flips in this area. Most flippers do not want to make the necessary changes/upgrades to justify the selling price of the home compared to what they originally bought it for. But since the real estate market is so hot here, people are still buying these flipped homes. I would really look into the price history of the home and compare the price they paid vs the current selling price and ask the agents what upgrades were made to justify the price increase.
We spent eight months in 2017, searching for a single family detached, in Lancaster County. We quickly caught on to the fact that some of the agencies, and you correctly noted Berkshire in particular, are wizards at making a pile of dog doo look like a perfect steak. One place was a storybook little brick ranch. Ridiculously cute, and desirable. The front yard looked huge, and the entire exterior shoot looked like a peaceful rural location. We get there and the front door is twelve feet off the edge of a major two lane road. The traffic roar was continuous, and one side of the property featured a flop house looking structure that apparently claimed to be apartments, but looked like a skid row hotel, LOL. Since it was in LC, I'm sure somebody bought it in a week or two, anyway.
As a retired builder, I wanted to point something out on your take of flipped places in the area. When I moved into the area, I had some discussion with realtors about finding properties to flip. The problem is that the area has been so hot, for so long, that there really wasn't enough of a "split" or the gap between the total investment, and final net profit, to do it with the standards I find acceptable. So, it's not a matter of local flippers not "wanting to" make necessary changes to anything they buy, they simply can't do it, and stay in business. For example, a lot of these places suffer from deteriorated, two century old brick. They need to have a professional repair or replace damage, and re-point the exterior. For a typical flipper, doing so, would be a deal killer, a fully restored exterior, done correctly with period windows, doors and trim, would far exceed anything they would hope to ever make on the project. The buyer is fine with a few coats of some trendy shade of dark gray paint slapped on an exterior that is literally falling apart, and will drool all over the natural stone countertops on top of the new garbage grade, particle board cabinets. Throw in an industrial looking stair rail with steel tension cables, sand the old garbage wood floors down, and expose a brick wall in the living room, and your good to go, it will sell in 48 hours.
It is what it is. It's trying to give the buyer what they want, making a living while paying ridiculous amounts for crappy old row homes to patch up, and hitting all the trendy looks that sell a place in the city. Buyers determine what they want and that is a cool looking place in a desirable neighborhood. They often could care less that the windows are held together with wood patching putty and hope, or that the brick exterior is in a state of serious decay under that freshly slopped on paint. It's a cool place in a cool city, where do I sign.
We spent eight months in 2017, searching for a single family detached, in Lancaster County. We quickly caught on to the fact that some of the agencies, and you correctly noted Berkshire in particular, are wizards at making a pile of dog doo look like a perfect steak. One place was a storybook little brick ranch. Ridiculously cute, and desirable. The front yard looked huge, and the entire exterior shoot looked like a peaceful rural location. We get there and the front door is twelve feet off the edge of a major two lane road. The traffic roar was continuous, and one side of the property featured a flop house looking structure that apparently claimed to be apartments, but looked like a skid row hotel, LOL. Since it was in LC, I'm sure somebody bought it in a week or two, anyway.
As a retired builder, I wanted to point something out on your take of flipped places in the area. When I moved into the area, I had some discussion with realtors about finding properties to flip. The problem is that the area has been so hot, for so long, that there really wasn't enough of a "split" or the gap between the total investment, and final net profit, to do it with the standards I find acceptable. So, it's not a matter of local flippers not "wanting to" make necessary changes to anything they buy, they simply can't do it, and stay in business. For example, a lot of these places suffer from deteriorated, two century old brick. They need to have a professional repair or replace damage, and re-point the exterior. For a typical flipper, doing so, would be a deal killer, a fully restored exterior, done correctly with period windows, doors and trim, would far exceed anything they would hope to ever make on the project. The buyer is fine with a few coats of some trendy shade of dark gray paint slapped on an exterior that is literally falling apart, and will drool all over the natural stone countertops on top of the new garbage grade, particle board cabinets. Throw in an industrial looking stair rail with steel tension cables, sand the old garbage wood floors down, and expose a brick wall in the living room, and your good to go, it will sell in 48 hours.
It is what it is. It's trying to give the buyer what they want, making a living while paying ridiculous amounts for crappy old row homes to patch up, and hitting all the trendy looks that sell a place in the city. Buyers determine what they want and that is a cool looking place in a desirable neighborhood. They often could care less that the windows are held together with wood patching putty and hope, or that the brick exterior is in a state of serious decay under that freshly slopped on paint. It's a cool place in a cool city, where do I sign.
221 S Queen St is a great example for flipping and looking for a huge return. Purchased for 75k and originally wanted 335K. Really?
I don't disagree with your above statement, but I think the flippers expectations should be reasonable. Then again the market in Lancaster PA is so hot, I'm sure this will get some in the 300's.
Wow, that place is a textbook example of the flips I've discussed. Slopped paint all over the brick exterior. The brick is in poor condition and they were too lazy, or incompetent, to cut a straight vertical line at the adjoining property. laminate flooring throughout the first floor that looks suspiciously similar to the $69/sq. ft. garbage from Ollie's Bargain Outlet. The tile work is garbage, take a look at the niche in the shower, the opening is radically out of square (eyeball the top compared to the tile wall) Other bath tile pics look blurry, which might be a trick to hide the fact that the work is garbage, especially on the feature strips? But overall, the whole look of the place is what's hot, HGTV approved, and will sell.
Two issues on the purchase price VS ask. I support a housing ministry in the city. Based on their experiences, and the market, it's a good guess that the flipper bought a rough shell of a property for that original $75K. That said, unlike most potential flippable properties in town, that one probably had enough split in it to do an outstanding job, which these guys obviously couldn't be bothered with. The other stunning point is that they have reduced the ask from $344 to $314 over a couple of drops in LESS than a month. Either the seller is panicking, or they thought it should sell in a day, and wildly overshot.
This S Queen st property isn't even the worst one. I could pull up half a dozen easily that the flip work is much worse and the margin expectations from the flippers is crazy.
I guess the demand is that much that people are willing to overlook certain details as they fear they'll be priced out of the housing market in the future if they don't buy now.
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