Property Tax Quagmire (contingency, foreclosures, investments, mortgage)

[cohdane]

Just wanted to throw this out here:

Every budget expert out there knows you need to factor in property taxes and mortgage interest (and/or deduction) in calculating your house purchase.

Today, as if buyers don't have enough to contend with, property taxes are hugely inflated due to the bubble, but there's no way to be certain whether an assessment appeal will have any success even if the house sells substantially lower fair market value than the assessment.

Between short sales, foreclosures, and regular old mom-moved-on-and-the-house-is-empty inventory, plus the oversupply of "regular" sales, it's impossible to gauge anything. If a short sale has no takers for upwards of a year, will the county call it "fair market value" once someone ponies up the asking price? The properties I've been watching offer no consistent pattern.

Now they're tinkering with the mortgage interest deduction, so that's a moving target, too.

Just venting....people wonder why buyers are skittish. The above is a small part of it. Yet another two drops in a massive bucket of uncertainty that didn't exist last time I bought a house.

[manderly6]

A reduction in market value may have zero impact on property taxes. In my area the only way a tax appeal would work is if you can prove you are paying more than similar houses. If all the houses have dropped in value that is not going to help your cause. I realize this is different in different places, but don't just assume because your house goes down in market value that you are going to get a lower property tax bill.

[DowntownVentura]

I guess you are just venting and not looking for any real responses, such as how it works in your county or state or what others have done in your county or state.

I am sure tons of people here have gone through it, including me. So I share your anxiety.

[chet everett]

...EMOTIONS, by themselves the feelings that go along with investments ( why did THEY make out so well, what if I GET LEFT holding the bag, how can I make out LIKE A BANDIT, etc) are NORMAL and to be expected. When those emotional thoughts are PARALYZING or lead one to either hasty action OR FOOLISH INACTION then cross a line.

I can tell you stories of couples that had such terrible "buyers remorse" that it actually lead to the dissolution of their marriage. On the end of the spectrum I also know some couples that remained renters, against one of the spouses strong desires, and that to lead to a break up.

There are limits to what one know about anything involving money. It is IMPOSSIBLE TO COVER EVERY CONTINGENCY! If you want to find something else "to obsess over" maybe you just cut out to be homeowner.

When it comes to property taxes the above statements are fairly accurate, depending on where you live the appeal process may be relatively easy and result in a fair number of modest reductions. In other areas, even in adjacent counties, it may seem like the review board is run by a Mr Potter type with a big REJECTED stamp for all filets, but that probably complies with the law.

In my 25+ years of involvement with real estate, as home owner, landlord/ investor, and real estate agent, I have seen many home owners be "shocked" at the jump in the property tax bill, but only once or twice did I really encounter a person that had such a hike that they could not have planned for it, and in those cases it involved LARGE unique parcels that were more valuable due to changes in surrounding land use that had been happening for decades. Yes, in such cases when the property owner does not have the income to justify owning what is practically a whole new subdivision, their lives can be disrupted by having to break- up their historic "homestead" that may have been in their family for generations, but that happens SO rarely that as be hard to imagine one would let that keep 'em up at night.

Realistically, if you buy a house and it is under assessed from prior oversights (or clout of previous owners for Cook Co.) you must factor in what the likely initial jump in the tax bill will be. If when you buy the property it is already paying a fair share and your concern is that reckless government budgetary policies will eventually cause taxes tom rise well then I have to say your in the same SINKING SHIP AS EVERYOTHER PROPERTY OWNER SHOULD BE! Even renters will have those cost passed on by strapped landlords! If that means that Lakeview rentals start to make Manhattan seem like a bargain because of Quinn and Madigan refusing to give Daley the power to underfund the Union pensions where is the axe going to fall?

You have to see the big picture. Whether you buy in Chicago or some rural Wisconsin hamlet if the folks in charge of spending tax payer funds don't treat it like the hard earned dough that really belongs to the folks that busted their tusk to earn it, and not the magical right of the connected loafers, well you will eventually GET SCREWED...

[SmartMoney]

It's funny (more ironic), in one of our country estate counties, where the Senators and Congressmen reside, values have plunged.......neighboring residents call to refinance and continually spout, "but my assessment is still where it was last year, we didn't lose any value." But then we have to explain to them, they live in a county that only assesses only when their Board of Supervisors votes to reassess.

They haven't lost any value in the real estate crash

[cohdane]

Yes, just venting.

In our county, the theory is that the assessment is based on whatever a home sells (or would sell for) in "an arm's length transaction." That used to rule out vacant/distressed sales, but there are so many of them now and they sit for so long that the review board is beginning to consider even the short sale prices to be at market value.

But only sometimes. Sometimes not. Depends which way the wind is blowing. No way to predict.

At that's the crux of my frustration.

Any sensible person wants to at least have a vague idea of what they're getting into. But a house assessed at $900,000 with a tax bill to match, that's listed at $650,000-- sitting, not selling-- well, maybe you like that house for $650,000 and maybe you could afford taxes for $650,000, but taxes for $900,000 isn't in the cards.

And you can't know which taxes you'll have till you buy the place.

So....one more reason houses are sitting unsold. Freaky unpredictable assessments.

And yeah, those examples were on the high end, but the ratio tracks all the way down to the low end. You feel like the assessment board is Monty Hall. Are you going to get the living room set or the donkey?