Real Estate Taxes

[RodFarlee]

Originally Posted by timetogo

I gues you live in washington, so can you explaind in detail how real estatate taxes change each year? It is an arcane and obsolete tax system which above all needs to be indexed to inflation like all other taxes...

I think you have the facts down pretty well.

As far as opinions go, we agree on some and disagree on others, and I'm quite content to leave it at that. All this has been debated at length in WA. Initiatives 722 and 747 (WA versions of Prop 13) were both declared unconstitutional on many grounds, including the fact that they would violate the state constitutional guarantee that the tax system be uniform. Limiting tax increases on desirable, rapidly appreciating properties would raise taxes on less desirable homes that are not appreciating. Limiting taxes on long term homeowners would increase taxes on new homebuyers. That is not equitable, not uniform, not equal under the law, not constitutional. On this, only the judges' opinions count, not ours. The judges ended this debate.

Originally Posted by timetogo

Most of what I have been told is that Washington real estate is defying the national trend in a flat market. I found this hard to believe but real estate is local.

I believe it. My neighbor, a homebuilder, sez "All my buddies are talking about a softening housing market, but they're all still busy working!" My other neighbor, a realtor, sez the same.

Originally Posted by timetogo

I am moving from a market which is in a clear decline so my fear is that I sell low and buy high.

FWIW, if I were in your shoes, I wouldn't wait. You may have missed selling into the peak of the bubble, but homes are still moving. If you wait a year or certainly two, things are likely to be less favorable.
If we do enter (or are entering) a recession, and history is any guide, CA will lead the nation by about a year, and WA will follow the nation after about 2 years. If you wait, you stand a chance of being trapped in the middle of that, unable to sell.
However, if you wish to remain under the benevolent protection of Prop 13, then don't move, be happy!

[nouveautes]

You have done a lot of research on cpi indexes and taxes etc. Of course that is a consideration. Coming from Calif you are going to get a steel of a deal
in SW washington. not so in Seattle/Bellevue/Issaquah area.
Prices reflect supply and demand of the last few years. Land is getting scarce and builders prices reflect NO LOTS to buy. Get it?
Our profit margins are marginal.
1) No you don't get ripped off by builders with 8 percent tax,. That has to do with material purchases for the building of your home, and is factored into any selling price.
2) sellers pay the excise tax, not the buyers
3) Excise tax varies by county as does Millage rate on assessed value
4) There is no INCOME tax here, like California or Oregon
5) If you live in SW washington, you can buy carryable goods over the border without paying sales tax
6) Except snohomish, & king county, property taxes are much cheeper than California
7) Have you noticed a hugh inflated appreciation in your property in California
8) you could probably pay cash for a home here, and pocket $$ to live on

[KidBlue]

Noveautes makes some good points in his/her last message. I sure hope points 7 and 8 are correct!

Housing costs are very different in CA depending on the county and area of the state you live in. Although Prop. 13 capped the percent a house can be taxed originally, and each subsequent year, the local counties are very good at getting their revenue any way they can. Counties that don't have large population bases (i.e. not a lot of people to tax) just inflate the appreciation value on homes. For instance, Nevada Co. appraises homes at 4 times the value that Sacramento does. Nevada Co. reassesses every year while El Dorado Co. reassesses about once every five years.

Also, permit fees can be astronomical in rural counties. In El Dorado Co. a friend just built a home for $400,000 and the permit fees alone were another $60,000, but the appraised value of the home is $400,000 even though it would probably sell for more than double the building cost (at least). So, no matter where you live, the county and state will get their share and the value of real estate follows the rules of supply vs. demand.

[dan_mp]

Originally Posted by timetogo

I have heard that if you build a house, an 8% tax is due. Sounds like a law to pad the wallets of the builders.

That's just sales tax -- avg rate is around 8%. You pay that on the builders work.

I think it's the same in CA. Just a sales tax on services.

[dan_mp]

Originally Posted by timetogo

Californis real estate tax is brillant: all real estate taxes go up 2% per year plus new taxpayer assesments plus new buildings. The net effect is that taxpayers know what to pay each year and the county cangrow it's revenue base base in excess of the inflation rate . A win Win situation unlike Washington.

I disagree that the real estate tax is brilliant. My in-laws live in the Bay Area and thanks to prop 13 pay tax on a very low value of their home. How is that fair when their neighbors are paying 4X-6X as much? They don't use fewer government services? The people paying 4X-6X are carrying the rest of you.

And if CA's tax system is so great, why is Arnie having so much trouble funding services, eduction, etc.?

Yes, the predictibility is nice. But it is certainly not equitable.

Back in the 90's, Oregon tried the same thing with Measure 5 and look at their school funding problems now.

WA's system is not perfect. And tax collections have grown due to market value appreciation, not the number of bond issues. Most assessments in our area (SW WA) are at 75% mkt value (which also cuts down on the challenges).

To make a fair comparison between WA and CA, I would do it with what non-Prop 13 people (your newest neighbors) are paying vs. what they would pay in WA. Then we can talk about whose property taxes are higher.

[ruby2zdy]

Originally Posted by timetogo

Hi,

I did not know about the 1.8% exercis tax. I hope the seller pays all of it.

Actually, I think Washington has capped by law the increase in county budgets to the inflation rate but how thoses increases are spread across homeowners is based on home values and when assements are revised. This law offers a modicum of protection but is complictaed, and confusing.

Reverse mortages are the biggest rip off .

I have heard that if you build a house, an 8% tax is due. Sounds like a law to pad the wallets of the builders.

The excise tax is paid by the seller. Which is wonderful unless you're the seller. It shouldn't exist at all.

I haven't heard that WA has capped Co. budgets at the inflation rate. They certainly haven't capped property tax increases by the inflation rate, but what if they did? And then the inflation rate went up to 10% like it did in the '70s due to the OPEC surprise. See below, too.

A few years back, the voters passed a Prop. 13-like law, but it hasn't been implemented. This really pisses me off. Is this not a democracy? (The answer is no, but it's supposed to be.)

I don't know about an 8% tax if you build a house, but I wouldn't doubt it. The building dept will get you every way they can.

With a reverse mortgage you mortgage your future, which you can't predict.

When I wrote last, my prop. taxes had gone down compared to the previous year (I was owner both years). However, now they've gone up, but they won't tell me to what! The increase is based on home values in the first 6 mo. of '06 (no particular cap), without regard to the fact that home values are now stagnant or decreasing a little. I wrote to complain but there's no recourse.

I'm finding that local govts are the least responsive to voters' wishes. Higher-up representatives are more in the public eye (and in a bigger public eye). And City Councils? Just forget them. They're totally in the pockets of developers. I tried to fight City Hall but they were having a love affair with the developer. I mean this almost literally. If the developer wanted a change in the original plans (my development is in a big Master Plan), which would impact our surroundings and even change the HOA rules to triple our dues -- well, that was a wonderful thing. If we complained in the public hearing, too bad. It was more important that more houses go up so the County could get more income. Meanwhile, they had failed to find a source of WATER for the new developments! As for the developer, (a) they're from out of state, so their profits will be spent out of state, and (b) they're already rich enough to own private planes, and those things are expensive. They don't need more money more than we need a nice neighborhood (why we all moved here). The City Council is completely blinded by the pheromones of the developers.

A Steinbeckian note: I knew a farming family who settled in Marin Co. in CA in 1910 (not a typo). I met them in the mid '60s. In the '70s, before Prop. 13 passed, they literally got taxed off their land. They had about 50 ac., upon which they grew wheat and which they rented out for cattle grazing. They weren't rich by any means, just had the little farmhouse & their barn. Raised their own vegetables & meat. The rush on Marin Co. beginning in the '70s and the consequent rise in land/house prices pushed their property taxes up and up until they could no longer afford to own their land. They were forced to sell. The only silver lining is that they sold at the then-higher Marin Co. prices so were able to retire w/o moving to a cardboard box. But if Prop. 13 had been in place, they could have kept farming & sold when they all had to go to nursing homes, and made a lot more money to help pay for their care.

I'm afraid, being retired and on the infamous Fixed Income, the same thing will happen to me here in WA, only I will end up in a cardboard box.

[StealthRabbit]

Originally Posted by ruby2zdy

The excise tax is paid by the seller. Which is wonderful unless you're the seller. It shouldn't exist at all.... The rush on Marin Co. beginning in the '70s and the consequent rise in land/house prices pushed their property taxes up and up until they could no longer afford to own their land. They were forced to sell. ...
I'm afraid, being retired and on the infamous Fixed Income, the same thing will happen to me here in WA, only I will end up in a cardboard box.

As you've probably read, I'm no proponent of WA RE taxes... Mine went from $800-$8000 in 10 yrs, and now to $11,000 (even tho I haven't 'improved' the home, same as I built for $100k 12 yrs ago (just a bit more worn out)... We have a trashed mobile home next door that we rent out for $400/month, and they just valued it at over $300k... (I paid $50k for it 12 yrs ago) While there is supposed to be a cap, (we voted it in...) the state supreme ct. disallowed it.

We've been taxed out... (unemployed for 2 yrs now). Wehave to sell and move under a bridge, had to tell the kids it was their last Christmas in the home where they dug the footing with a pick, and poured the concrete.... My dad lost his farm to high taxes, as did my Granddad (which is really sad as you put A LOT more work into a farm, as compared to a house. (24x7) + years to build up the soils and build barns, fences, corrals, wells, plant trees...

I was privileged to pay $13,800 property excise tax on a sale I made this month... Realtors got another $70k, (I rarely use them, so I guess I was 'due') and I walked home with $3606.00 (tho I am holding a note...I hope they pay up!!...)

The big issue with WA property taxes, is that your Tax assessor makes the call on 'Perceived fair market value', (tho he must be able to prove)and you need to disprove him (they have a lot of data...it's their job...) I always fight it, and sometimes win a few $$ concession, but they promise to 'get' me later, and they always stay true to their word. I live in a 'national scenic area', thus, limited lots available. So... there are many people who 'speculate' on the few lots that are left. One prime lot has sold at least 5 times in the last 10 yrs. Price just goes up and up, usually due to someone parking 1031 money in it, knowing they can sell later. I doubt if anyone will ever build on it. This gives the assessor reason to up our ante. I recently did research on ~ 50 homes nearby to get a building permit, and I see that many people are really getting hosed. It became evident that there was a 'premium' on the homes owned by people with addresses in other states, as they probably don't fight the increase. I was having to calculate the Standard Deviation (variation of data) as the county requires that you can only build a home with sq ft limited to 2 Stdev of the mean Sq Ft of homes within 1/4th mile. I wish they would have placed the same strict rule on tax increases...

Yes, Fixed Income + WA state property taxes = trouble, they are really shooting themselves in the foot, knowing that the earning power of the demographic is rapidly diminishing. You really need to shop by Mill Levy, and also valuations, and whether you have an aggressive assessor, or one who is willing to wait a couple yrs to verify values are sustained BEFORE they jack up your price. I would guess the average Mill Levy is between $12 / $1000 to $15/$1000. Areas have been known to be as low as $7/$1000. Also verify the insurance rating, since some places are not protected by fire dept. (usually in the boonies). It really disturbs folks when the DNR fire dept shows up and hoses down the forest to keep it from buring, but lets their cabin burn... Their job is to protect the Natural Resources, they might put out your cabin fire so they can go home, once they are sure the forest is safe.