condo/townhome property tax? (Arlington, McLean: sales, real estate, rental)
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As my user name suggests, I've not bought a home before and so am really naive about a lot of what is sure to be coming my way soon (next couple weeks).
I'm planning to move to NoVA, probably Fairfax, and am not certain on how the property taxes work. I'm looking at some of the many townhouses or condos, depending on how their described, and am not sure if I must pay property tax on them or not. Is there a simple to follow rule on this issue? I see most times there is an HOA fee, sometimes a condo COOP fee, sometimes both. Where I really get confused is in the amount of these fees. Most places I'm looking at are in the price range of $375K to $425K. That relatively tight range shouldn't cause a huge difference if taxes are included, though the condo COOP fees, if they includes taxes, range from as low as $110 to over $400. I realize that fee may be for other amenities, but I thought property taxes, or lack of, was a benefit of buying a condo and maybe a townhouse too, though I can't be sure of that.
I'm not familiar with how coops work, but I own a small one bedroom condo in N. Arlington and have always paid a monthly HOA fee and property taxes on the unit. HOA fees in condos and TH tend to be high because they include standard services you would expect in these places (e.g., security, ground/building maintenance, trash/recycling, etc.) as well as other services (e.g., water, phone or cable). It's very important that you check out exactly what you are getting for those fees so you know what your true monthly expenses will be.
Co-ops tend to have taxes included in the monthly fee since the co-op is an entity that owns the real estate and the member, i.e. the owners, own shares in the co-op and have living rights in the co-op based on those shares. This means that the co-op is a single entity, much like a corporation, and is taxed by the county as a single entity. It is easier for the co-op to collect property taxes on a monthly basis than a big sum every six months, that's why it's in the monthly fee.
As far as condos and townhomes not paying property taxes, all I can say is I wish. Since you own the individual unit in a condo you will be billed for property taxes by the county and pay it every 6 months unless your mortgage company collects it for you. To figure out what your taxes will be look on the county's website for the rate and then multiply it by what you are going to pay for the property. Your assessment will end up pretty close to that.
Yes, I don't know all of the legalities, but I own a condo in McLean in roughly that price range - maybe slightly lower but above 300K - and the condo fee is approaching $200/month. (10 years ago it was about $115/month). For some reason at a condo down the street (comparable price range), condo fees are more like $600/month, rumor has it, not completely sure. And if this is true, I couldn't say why. It could be that they are including something I hadn't realized they were including; or it could be that older complexes have larger maintenance expenses?? I don't know.
Property taxes have also increased quite a lot in the last 10 years. They seem to add roughly $300/month to my mortgage. The tax bill is handled by my mortgage company, but almost every year they (my mortgage company) write to say that I have a shortfall because they underassessed how much I would owe, so I have to toss a check for another $200+ in the mail (this is just once a year but I never see it coming).
Your property tax is included in your mortgage. When I lived in NoVa 4 years ago, I had owned my home for 2 years. In just over 2 years my monthly mortgage pmt increased $450 in that time - all due to increased taxes. Every year it went up and up - until I was struggling too much to pay my formally affordable - then unaffordable mortgage. The sad thing is that my mortgage was only for $200K - with the housing prices now I can't even imagine how bad it would have been if I had stayed.
My HOA was pretty reasonable - but HOA's can a real pain!!!! It seemed we we were always getting notices for things like my grass was too tall, we parked in the wrong place, miniscule paint chips on my bay window. I felt like I did not own my home - the HOA did!
In Fairfax County, each year you receive a notice of what they have assessed the value of your house to be. They then multiply that value by their property tax rate. Currently the rate is 89 cents for each $100 of assessed value. That is the amount you'll end up paying and it will be stated on your notice.
One thing that can be deceptive is that the tax rate can go down while your taxes still go up. That happened for about four or five years, beginning around 2001, because house prices were climbing astronomically. The tax RATE had been about $1.13 per $100 of assessed value. Because the assessed VALUES kept escalating, the Board of Supervisors was able to claim they were reducing taxes by reducing the rate, yet the amount everyone was paying actually doubled, because the assessed values jumped so high. (That is no longer happening.) The Board may decide to raise the rate in 2008.
To find out the current assessed value on a specific property, you can go here:
As for how the property taxes are paid, I think it it normally collected with your mortgage and paid through an escrow account. (My husband pays the bills in our family so he would know the details better than me but he's not here for me to ask.) People whose mortgages are paid off have to pay the bill directly to the county, I believe.
HOA and condo fees are separate; they are paid to the HOA or condo association, not the county. (I don't know how a co-op works; I don't think there are many of them in NoVA, are there?) What the HOA fees cover depends on the particular HOA but generally it pays for trash pickup, snow removal and maintenance of any private roads in the HOA, maybe recreational facilities such as a pool or fitness center.
Just one more thing, occasionally units that look like townhouses are actually condos; if so I think they would list a condo fee rather than an HOA fee.
This does make me wonder ... is it possible with falling real estate prices that our assessments (and thus tax bills) will decline? My mortgage just keeps climbing but I haven't scrutinized the numbers too closely since it's just a second, maybe third property depending on how you count ...
Rule of thumb: If you actually own a piece of property (regardless of form) you will pay the real estate tax directly, almost always as part of your monthly mortgage payment, itself typically comprised of four things -- principal, interest, real estate taxes, and homeowners insurance premiums. If you lease or rent property, you will pay the real estate tax indirectly through the party on the other side of your lease or rental contract. Sometimes it's just included in the rent, and sometimes it's separately listed as part of your lease payment. If you pay real estate taxes directly, they are deductible on your federal and state income tax returns, but not if you pay them indirectly.
Real estate assessments go up and down with the market. Assessments are loosely based on a fair market value estimated each January 1 by examining recent sales of generally comparable properties. Last year, my own assessment went down by 14%, after increasing by 2% the year before, and by 30% the year before that. Other homeowners may have had very different experiences, depending on imporvements to their property or the numbers on sales of comparable properties in their areas. The actual taxes paid meanwhile are equal to the assessment times the rate. The rate was $1.23 per hundred in 2002. It is currently $.89 per hundred and will likely be adjusted again next Spring, once the annual assessments for 2008 are completed. The Tax-Whiners will complain no matter what happens...
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