House buying- How to think about property taxes?

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jasc15
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House buying- How to think about property taxes?

Post by jasc15 » Thu Mar 30, 2017 9:36 am

In looking for houses at the same price, say $350,000, property taxes seem to range from $7000 to $11,000 annually in my region of northern New Jersey. Its not really a question of affordability since I can technically "afford" to spend $11,000 a year in taxes, but I balk at such numbers. I've drawn an arbitrary line in the sand of $9000 for a $350,000 house, which is based more on my gut than anything else.

Is there a more logical way to approach this? I know the towns with higher tax rates are usually more desirable and have better rated schools, well maintained public spaces et cetera, but it's really not possible to quantify every facet of this process.

Andyrunner
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Re: House buying- How to think about property taxes?

Post by Andyrunner » Thu Mar 30, 2017 9:41 am

Yes, move to the midwest where property taxes for a 350k house are about $3k and just ignore the cost of property taxes when house hunting.

I don't see any other logical approach unless you want to get into the details. I'd just avoid the neighborhoods that have crime/school issues.

dbr
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Re: House buying- How to think about property taxes?

Post by dbr » Thu Mar 30, 2017 9:43 am

jasc15 wrote:In looking for houses at the same price, say $350,000, property taxes seem to range from $7000 to $11,000 annually in my region of northern New Jersey. Its not really a question of affordability since I can technically "afford" to spend $11,000 a year in taxes, but I balk at such numbers. I've drawn an arbitrary line in the sand of $9000 for a $350,000 house, which is based more on my gut than anything else.

Is there a more logical way to approach this? I know the towns with higher tax rates are usually more desirable and have better rated schools, well maintained public spaces et cetera, but it's really not possible to quantify every facet of this process.
I think the logical thing is to choose to locate where things that are important to you are best met and not draw lines in the sand concerning taxation. There is the old saying about "Don't let the tax tail wag the (whatever) dog."

The only way I know of to systematically lower your tax burden is to locate in a completely different locale, such as much more rural, another state, etc. Not many people find it practical or desirable to locate according to taxation especially after considering benefit of local services.

BeerTooth
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Re: House buying- How to think about property taxes?

Post by BeerTooth » Thu Mar 30, 2017 9:45 am

If your goal is to minimize taxes, buying property in Northern NJ is not wise. It just comes with the territory, so to speak. And just because one town has slightly lower or higher rate now, doesn't mean it won't change significantly over the period of ownership.

corysold
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Re: House buying- How to think about property taxes?

Post by corysold » Thu Mar 30, 2017 9:46 am

Andyrunner wrote:Yes, move to the midwest where property taxes for a 350k house are about $3k and just ignore the cost of property taxes when house hunting.

I don't see any other logical approach unless you want to get into the details. I'd just avoid the neighborhoods that have crime/school issues.
You mean the Midwest not including Illinois. Illinois taxes would be similar to what OP is looking at.

Not sure if your state is the same, but in IL, taxes are broken down into county taxes, township taxes, city taxes and school district taxes. Each of those can differ and each city might be divided into two townships, so taxes across town can differ.

As you said, it can be tough to quantify. If you have kids, I'd look for a school district or two you are comfortable with and go from there.

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Re: House buying- How to think about property taxes?

Post by Kosmo » Thu Mar 30, 2017 9:53 am

What's more important to you: paying lower property taxes or living in a better school district with better public services? You answer changes if you have school aged kids, or use the library and parks a lot, or prefer higher funding for police/firefighters/EMTs, or you want more services for seniors, or youth sports programs...or lots of other things.

Property taxes vary greatly by state as to what the money goes towards. If you're seeing a large variation in a small area (where everyone is subject to the same millage rate), then it's entirely due to assessment. And that could be related to the age of the house or how recently upgrades were made.

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Re: House buying- How to think about property taxes?

Post by Lafder » Thu Mar 30, 2017 9:55 am

Where I live, the current property taxes can have no relation to the taxes a new owner will pay since the property taxes end up being based on sales price. The existing taxes may be based on outdated appraisals especially if the home has not been sold for a long time. So be careful about whether you are looking at current owner's property taxes or what you will pay if you buy the house.
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Re: House buying- How to think about property taxes?

Post by cheese_breath » Thu Mar 30, 2017 9:56 am

Certainly you can draw a line in the sand. Just buy a less expensive house with lower taxes. You can't dine at the Ritz and expect to pay McDonalds prices.
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Re: House buying- How to think about property taxes?

Post by Sandtrap » Thu Mar 30, 2017 9:59 am

dbr wrote:
jasc15 wrote:In looking for houses at the same price, say $350,000, property taxes seem to range from $7000 to $11,000 annually in my region of northern New Jersey. Its not really a question of affordability since I can technically "afford" to spend $11,000 a year in taxes, but I balk at such numbers. I've drawn an arbitrary line in the sand of $9000 for a $350,000 house, which is based more on my gut than anything else.

Is there a more logical way to approach this? I know the towns with higher tax rates are usually more desirable and have better rated schools, well maintained public spaces et cetera, but it's really not possible to quantify every facet of this process.
I think the logical thing is to choose to locate where things that are important to you are best met and not draw lines in the sand concerning taxation. There is the old saying about "Don't let the tax tail wag the (whatever) dog."

The only way I know of to systematically lower your tax burden is to locate in a completely different locale, such as much more rural, another state, etc. Not many people find it practical or desirable to locate according to taxation especially after considering benefit of local services.
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Re: House buying- How to think about property taxes?

Post by cadreamer2015 » Thu Mar 30, 2017 10:03 am

If you think that the housing market is efficient, which I know can be debated, higher property taxes will be capitalized into lower home prices if home purchasers don't think they are getting value from greater / better government services. My experience in Northern New Jersey was that some towns provide things like school buses and trash pickup as a government service, paid for by tax deductible property taxes, while other towns did not provide these as government services as you had to pay out of pocket for those things.

It doesn't make any sense to me to make an arbitrary dividing line on property taxes. What makes more sense to me is to compare total after tax housing cost with the value to you from the housing services you would get with each house. That way property taxes are one of, but not the only, criteria you analyze when choosing between houses to purchase.
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twins2012
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Re: House buying- How to think about property taxes?

Post by twins2012 » Thu Mar 30, 2017 10:27 am

Property tax is important once you retired and on a fixed income. Not so much when you are working and have kids in public school. Like my parents, their property tax increase 2% every year regardless of the housing market. Lucky for them that they bought their house 20 something years ago in the Bay Area.
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Wakefield1
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Re: House buying- How to think about property taxes?

Post by Wakefield1 » Thu Mar 30, 2017 10:35 am

Exorbitant and rising property taxes make it such that the taxing authority acts like a landlord and property owner. Property taxes that look like rent.
A tool for gentrification and clearing out lower income or older residents from an area.

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Re: House buying- How to think about property taxes?

Post by user5027 » Thu Mar 30, 2017 10:40 am

You don't have to move as far as the midwest to have lower real estate taxes. Try Pennsylvania.

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Re: House buying- How to think about property taxes?

Post by lazydavid » Thu Mar 30, 2017 10:41 am

corysold wrote:
Andyrunner wrote:Yes, move to the midwest where property taxes for a 350k house are about $3k and just ignore the cost of property taxes when house hunting.

I don't see any other logical approach unless you want to get into the details. I'd just avoid the neighborhoods that have crime/school issues.
You mean the Midwest not including Illinois. Illinois taxes would be similar to what OP is looking at.
Truth. My house was $420k, and is in one of the cheaper towns from a property tax perspective (Schaumburg) due to a huge commercial tax base. But my property taxes are a hair over $10k/year. Cheaper houses one town over have taxes that are 50% or more higher than mine.

NJdad6
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Re: House buying- How to think about property taxes?

Post by NJdad6 » Thu Mar 30, 2017 10:43 am

Unfortunately there is no getting around it in NJ. You have to "pay to play". Even if you find something below your line, doesn't mean it won't go up significantly in a few years. There are lots of benefits to living in NJ but property taxes are not one of them.

Nick341981
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Re: House buying- How to think about property taxes?

Post by Nick341981 » Thu Mar 30, 2017 10:46 am

The best way to think about it is the state of New Jersey is telling you that you are not allowed to own property, just rent it. Pay off your house and then miss one tax bill, you will find out real quick who owns that house. :wink:

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hand
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Re: House buying- How to think about property taxes?

Post by hand » Thu Mar 30, 2017 10:52 am

Past performance is no guarantee of future taxes...

Rather than looking at current taxes, your decision should be based on expected (likely) taxes during your period of ownership and the value you're getting for those taxes.

Unfortunately future taxes (and benefits) are mostly unknowable, but some level of due diligence will serve you well:
1) Quality of schools if you have kids
2) Solvency of town / unfunded pension obligations
3) Growing or shrinking town and fixed (pension obligations, structured debt) vs. variable expenses (trash collection, police etc.)

If we lived in a rational world, these factors would all be priced into the housing costs, but the reality is that this is too complex for the average buyer (or realtor) so a nice house with a poor tax outlook is unlikely to be discounted vs. a similar house with a good tax outlook.

Bottom line, don't get stuck on the absolute number, focus on the future cost and benefits to you and your family while you own the house.

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Re: House buying- How to think about property taxes?

Post by Jags4186 » Thu Mar 30, 2017 11:03 am

This is the cost of living in New Jersey.

What you should do is determine what monthly payment you can comfortably afford and then go backwards from their to determine how much house you can afford.

Whether the home costs $300,000 with $10,000 property taxes or $340,000 with $7,000 property taxes shouldn't make a difference then as long as you're getting enough house for your needs.

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Re: House buying- How to think about property taxes?

Post by Wakefield1 » Thu Mar 30, 2017 11:13 am

I don't believe that higher property taxes necessarily correlate with better schools or services
there is a difference between high taxes (which might be worthwhile for some to pay for better services) and exorbitant taxes
certainly property taxes and the possible trend of property taxes in an area are something to consider for someone choosing a location for their dream home
some smaller cities or towns in Virginia I believe subject you to paying both a County and a City property tax but even so with both of these added together you might end up paying much less in property taxes for physically similar property as compared to being in a Northeast High Cost of Living area

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Re: House buying- How to think about property taxes?

Post by stats99 » Thu Mar 30, 2017 11:13 am

I have 30 years researching property taxes in Northern NJ. In my opinion, the house value has more to do with the school district quality than the property tax amount, although higher value usually requires higher taxes In fact, my experience indicates the best run towns and districts keep their "equalized" tax rate around or below 2% of market value.

chrismj
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Re: House buying- How to think about property taxes?

Post by chrismj » Thu Mar 30, 2017 11:24 am

People confuse the difference between house value and home (house+location) value. Your house is a depreciating asset: the paint chips, roofs leak, decor goes out of style. There's a reason why the old saying is "location, location, location." Property taxes are payment for the location.

Garbage pick up, police and fire depts, schools, road construction, are all services you pay for. But you also pay for the demand to live in an area, like if you live next to a waterfront or a park or whatever. Some things are just part of the public domain and if the local gov't was run like a business they would charge as much as they could for the monopoly they possess.

They could also give tax breaks for whatever reason they want. Are you retired and low-income and have lived here your whole life? Here's a tax break. Are you a new business? Tax break.

Low property taxes also don't mean low home prices. I wrote about that here: https://ello.co/chrisjetton/post/6o9ivwgwjweneyja8budlw

Basically, when people take mortgages out it's based on a percentage of their income they can leverage, e.g. 28%. If you lower the property tax, it leaves more income to leverage for a home loan. So in the long run, home prices actually rise because the amount of money spent each month stays the same, i.e. 28%, but the amount spent on the principal and interest increases (since property taxes are lower) and the "value" of the home increases.

Home values rise, generally speaking, for three reasons: the location becomes more desirable, income of buyers increases (like if property taxes drop), interest rates drop.

Mortgage rates in the early 80s were close to 20%. Almost all of the housing price gains since then have come from a drop in interest rates to 3.5%. Run the numbers on a mortgage calculator and see how much of a mortgage you can afford based on interest rates of 4 and 20%.

Coming back around to property taxes. Lowering property taxes lets homeowners extract value from the locality they live in. Baby boomers are making a killing now selling their "gains" to over-indebted millennials and gen x-ers. People aren't paying $400k, 500k, 1mil, to live in a state of the art giant house. They're paying to live in a nice neighborhood next to nice people. If anything property taxes should have been rising as the interest rates were going down. Then cities and states could have cut other taxes.

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Re: House buying- How to think about property taxes?

Post by PVW » Thu Mar 30, 2017 11:38 am

While property taxes may feel like a kickback that must be paid for the privileged of owning a home, you actually get something of value (public services) in return for the taxes. These things are part of the value of your home and it's location. When you sell your home, hopefully the value of these items will have outpaced the cost.

Instead of drawing a line in the sand at a fixed amount, you should weight the value of the public services against the cost.

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Re: House buying- How to think about property taxes?

Post by tdhg566 » Mon Apr 03, 2017 11:39 pm

Be careful assuming that property taxes are a tax deduction. May not be true if you pay AMT or if your itemized deductions are phased out. Many of my tax clients fall into that category. A house is a lifestyle choice, not a tax dodge.
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Re: House buying- How to think about property taxes?

Post by iamlucky13 » Tue Apr 04, 2017 2:31 am

Why think of property taxes as anything other than one of the costs of ownership, the *total* of which you should arguably compare to your other options (such as renting)?

If you've got an 80% LTV mortgage at 4% on a $350,000 property, $1000 in insurance premiums, and $9000 in taxes, that's $2170 a month.

You can make it more complicated if you want by factoring in principle paid down and value gain versus the alternate value gain if your down payment had gone to investments instead, or you can just keep it simple and shoot for an ownership monthly cost not too far above the rental monthly cost.

I never bothered trying to quantify the value of parks, etc. I did take note of them and gave consideration to how they compared to other areas I was considering, but having found them satisfactory, I didn't give them too much more thought.

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Re: House buying- How to think about property taxes?

Post by stickman731 » Tue Apr 04, 2017 5:57 am

If you are living on a budget you need to more concern with the tax increase and does your salary allow you pay them without distress.


I live in Middletown Township and my 2017 property assessment = the land value increased $55,000 and the house less than $1,500. My taxes were ~$8,000 for 2016. With the new assessment, I will exceed $10,000 based on 2016 ratable rate. For the last three years since the 2% standard was enacted - my taxes increased 6, 10 and now 20% year over year, respectively. When I purchased my house 14 years ago, taxes were ~$4,000.

The biggest loophole in the new law allow them to change your assessment annually and people moving in the area purchased homes at significantly high prices due to low interest rates. So your taxes are assessed based on comparable rate in Monmouth County. I can appeal but the lawyer will charge me $375 and I will save ~$450 on my taxes. It is not worth it considering the time of going to the lawyer and tax appeal process.

You need to remember that a house is not really an investment although many times it does increase in apparent value, but if you look at your total cost including interest payments, insurance, maintenance (repairs to lawn care to taxes) it is a losing proposition. I brought for the investment in my children and wife happiness for good schools and safer neighborhoods = so my taxes are worth it.

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Re: House buying- How to think about property taxes?

Post by tennisplyr » Tue Apr 04, 2017 6:41 am

For me the approach would be to find the right home will all of the dimensions that are important to me then see what the taxes are rather than pick the right taxes that appeal to me and see what kind of home I get. I paid high taxes in NY for 35 years but it was well worth it.
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Re: House buying- How to think about property taxes?

Post by Smorgasbord » Tue Apr 04, 2017 7:50 am

At least in the short term, property taxes are often based off the sales price, so a house that sells for $500k usually costs more in taxes than a $400k house where the owner put in $100k in improvements (assuming most of those improvements don't require a permit). So, look for a house with out-dated appliances, crummy carpet, single pane windows, an older roof, etc. to pay less in property taxes.

Next, assessed value counts certain areas of the house more than others, and a house with an amazing basement will cost you less in taxes than a house with a so-so second floor.

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Re: House buying- How to think about property taxes?

Post by jabberwockOG » Tue Apr 04, 2017 8:32 am

Property taxes can be a huge part of the cost of home ownership and they never get paid off, continuing forever. In some areas you can end up paying more than the cost of your home in property taxes over the long term. A smart potential home owner take all ongoing costs into account before moving to a specific area and home - property tax, local sales tax, state income tax, home insurance costs, utility costs, and finally cost of property - these all can vary wildly. As an example Texas has no income tax but property taxes on a 500k home are $12+k per year or more. Some high end city suburbs in Texas have very good schools but many public schools there are mediocre at best.

Paying high property taxes when you have kids in public schools and getting a great neighborhood with great schools and excellent city services can be worth it for that specific time period especially if you have a high income to support the high cost.

We paid relatively high property taxes to live in high end very safe neighborhoods with great public school districts when our kids were young and in school.

When we retired and the kids were long gone we moved to a beautiful town and area in a state with ultra low property taxes (and other ongoing costs also very low). Our property taxes go to $0 per year permanently once we reach age 65.

Having said all that, I consider paying New York/New Jersey/Illinois level property taxes at any time to be borderline insane given so many other way more reasonable places to live in the US. I know some folks love these places and/or can't move due to family or business reasons so those folks have to find a way to make it work despite very high never ending long term costs.
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Re: House buying- How to think about property taxes?

Post by WJW » Tue Apr 04, 2017 8:38 am

DW and I live in Essex County, NJ and are paying unreasonably high taxes. We converted our historic home into 2 units and collect rent to help ease the burden. I also own a 3-unit house in the same town, so that also helps. Some of our family lives in NC and their annual tax bill is less than our monthly tax bill.

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Re: House buying- How to think about property taxes?

Post by michaeljc70 » Tue Apr 04, 2017 8:57 am

I moved from my last house partially due to escalating property taxes. I bought a less expensive place with relatively low taxes. After being here 2 years, the taxes went up 25% in one year. I live in Chicago and I believe N NJ is probably similar in that they are always short on tax dollars. I guess my point is whatever the taxes are when you buy may not be the taxes after a few years (even adjusted up for inflation), so keep that in mind. Some states I think have a cap on how much they can go up in a year, but not here.

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goingup
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Re: House buying- How to think about property taxes?

Post by goingup » Tue Apr 04, 2017 9:01 am

Weighing property taxes would not make it into my "top ten" buying criteria. The reason is property taxes are pretty reliably 1% of sales price here in metro Seattle area. We have vigilant accessors who will make sure your prop taxes get bumped up accordingly.

Can't imagine choosing a home based on property tax levy. It's really about the overall affordability of the home, of which property taxes are just an attendant part.

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Re: House buying- How to think about property taxes?

Post by Nowizard » Tue Apr 04, 2017 9:06 am

One way to deal with it is related to schools. Both of our sons support public schools but do want the best for their children. If property taxes are higher in one neighborhood compared to another but has excellent schools, they consider the higher property taxes as a trade-off for being able to confidently attend a public schools rather than incurring private school costs.

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Re: House buying- How to think about property taxes?

Post by adamthesmythe » Tue Apr 04, 2017 9:26 am

> How to think about property taxes?

As part of the cost of living. (By the way- you still pay them if you are a renter).

I paid high taxes for decades so I could live within walking distance of work. It was worth it then. Moved to a lower cost of living area on retirement.

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Re: House buying- How to think about property taxes?

Post by deanbrew » Tue Apr 04, 2017 11:25 am

stickman731 wrote:I live in Middletown Township and my 2017 property assessment = the land value increased $55,000 and the house less than $1,500. My taxes were ~$8,000 for 2016. With the new assessment, I will exceed $10,000 based on 2016 ratable rate. For the last three years since the 2% standard was enacted - my taxes increased 6, 10 and now 20% year over year, respectively. When I purchased my house 14 years ago, taxes were ~$4,000.
:shock: Your taxes have gone up from $4k to $10k in 14 years? Holy cow, that's two to three times inflation. Hard to see how that can be justified or rationalized by the township/county/school district in any way.

What is "the 2% standard"?

Weighing property taxes would not make it into my "top ten" buying criteria. The reason is property taxes are pretty reliably 1% of sales price here in metro Seattle area. We have vigilant accessors who will make sure your prop taxes get bumped up accordingly.

Can't imagine choosing a home based on property tax levy. It's really about the overall affordability of the home, of which property taxes are just an attendant part.
If RE taxes are still reliably 1% of value, consider yourself lucky. While 1% used to be the norm in many areas, that percentage has been rising in many parts of the country. My county used to be about that, but we are now about 1.25-1.50%, mostly due to school district taxes. It appears that some areas are probably 2% or more, even with expensive/inflated home values.
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Re: House buying- How to think about property taxes?

Post by iamlucky13 » Tue Apr 04, 2017 1:44 pm

stickman731 wrote:I live in Middletown Township and my 2017 property assessment = the land value increased $55,000 and the house less than $1,500. My taxes were ~$8,000 for 2016. With the new assessment, I will exceed $10,000 based on 2016 ratable rate. For the last three years since the 2% standard was enacted - my taxes increased 6, 10 and now 20% year over year, respectively. When I purchased my house 14 years ago, taxes were ~$4,000.

The biggest loophole in the new law allow them to change your assessment annually and people moving in the area purchased homes at significantly high prices due to low interest rates. So your taxes are assessed based on comparable rate in Monmouth County. I can appeal but the lawyer will charge me $375 and I will save ~$450 on my taxes. It is not worth it considering the time of going to the lawyer and tax appeal process.
Most states that I've looked into base the final tax bill on the budget, not directly on home value trends. The home value determines what your share is relative to others, but if everybody's home appreciates by the same amount, your tax only goes up by the amount of increase in the budget.

However, in my county, re-appraisals happen every 6 years on a rolling basis, where the county "inspects" the home and determines if the current valuation, based on sales price trends since the last appraisal, is still accurate.

This year was my turn, and I'd done about $30,000 worth of improvements since the last appraisal. Based on typical cost vs. value guidelines, that should have increased the value by $20-25,000, on top of what I expected to be ~$25-30k of price inflation (runaway house prices in our area). Their appraiser drove by, took a photo from the street showing the lawn was mowed and the worn out siding and windows were replaced, and claimed my house increased by almost $100,000.

There was no way that had happened, so I appealed. I did the legwork myself researching nearby comparable sales (as well as indexing a past bank appraisal to the current year - not needed, but I figured it reinforced my case, especially when I saw a less than 5% difference between the two methods), so there was no cost to me beyond 8 hours or so of research and documentation. It saved me $700 on this year's taxes, and will do similar for each of the next 5 years.

You might look into the valuation process in your area to determine if your appeal will really only be good for 1 year. If the value is incorrect this year, and you successfully appeal, I'd expect the new value to be the starting point for determining next year's value.

jasc15
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Re: House buying- How to think about property taxes?

Post by jasc15 » Tue Apr 04, 2017 2:57 pm

Thanks to all for the comments. Lots of varied and useful discussion here. I was considering separately the property taxes and purchase price because one is recurring and the other a non-recurring expense (if you can really consider a mortgage non-recurring). Effectively over 30 years, it is one composite recurring expense. This directly addresses my "how to think about it" question. On the other hand, principle and interest effectively decrease year over year, while property tax is the same or greater every year, inflation adjusted, likely resulting in property tax payments exceeding mortgage at some point. Perhaps its not very useful trying to plan that far ahead since, as some have said here, that property tax is subject to unanticipated variability.

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Re: House buying- How to think about property taxes?

Post by bloom2708 » Tue Apr 04, 2017 3:11 pm

The way I think of it, when your mortgage is paid you will still pay north of $930/month for Property Taxes ($9,000) and Insurance ($1,200 just a guess).

We are in a lower COL area and our Property Taxes are ~$4,100 on a $420k house. Under $350/month, but certainly not free. An HOA fee to live in our city that will never go away.
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stickman731
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Re: House buying- How to think about property taxes?

Post by stickman731 » Tue Apr 04, 2017 4:13 pm

iamlucky13 wrote:
stickman731 wrote:I live in Middletown Township and my 2017 property assessment = the land value increased $55,000 and the house less than $1,500. My taxes were ~$8,000 for 2016. With the new assessment, I will exceed $10,000 based on 2016 ratable rate. For the last three years since the 2% standard was enacted - my taxes increased 6, 10 and now 20% year over year, respectively. When I purchased my house 14 years ago, taxes were ~$4,000.

The biggest loophole in the new law allow them to change your assessment annually and people moving in the area purchased homes at significantly high prices due to low interest rates. So your taxes are assessed based on comparable rate in Monmouth County. I can appeal but the lawyer will charge me $375 and I will save ~$450 on my taxes. It is not worth it considering the time of going to the lawyer and tax appeal process.
Most states that I've looked into base the final tax bill on the budget, not directly on home value trends. The home value determines what your share is relative to others, but if everybody's home appreciates by the same amount, your tax only goes up by the amount of increase in the budget.

However, in my county, re-appraisals happen every 6 years on a rolling basis, where the county "inspects" the home and determines if the current valuation, based on sales price trends since the last appraisal, is still accurate.

This year was my turn, and I'd done about $30,000 worth of improvements since the last appraisal. Based on typical cost vs. value guidelines, that should have increased the value by $20-25,000, on top of what I expected to be ~$25-30k of price inflation (runaway house prices in our area). Their appraiser drove by, took a photo from the street showing the lawn was mowed and the worn out siding and windows were replaced, and claimed my house increased by almost $100,000.

There was no way that had happened, so I appealed. I did the legwork myself researching nearby comparable sales (as well as indexing a past bank appraisal to the current year - not needed, but I figured it reinforced my case, especially when I saw a less than 5% difference between the two methods), so there was no cost to me beyond 8 hours or so of research and documentation. It saved me $700 on this year's taxes, and will do similar for each of the next 5 years.

You might look into the valuation process in your area to determine if your appeal will really only be good for 1 year. If the value is incorrect this year, and you successfully appeal, I'd expect the new value to be the starting point for determining next year's value.

Our physical inspection is slated "every 5 years" which happen two years ago and I did review comp sales - Open Public Records Systems allows for easier comparisons for sales price and assessed values - http://oprs.co.monmouth.nj.us/oprs/External.aspx?iId=13

Homes in our area (~150 homes) all had land values increased by $55,000 to be in parity with the nearby areas. As I stated, I could cherry pick the comps and will only save $375 at best if I am successful.

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Re: House buying- How to think about property taxes?

Post by davebo » Tue Apr 04, 2017 9:59 pm

I live in a similar high tax area in IL. We were looking in the $500K price range and couldn't come to grips with paying $13-$14K in property taxes. Granted, there were certain perks in living in these high tax areas like walkability to a downtown filled with restaurants, nice community feel, ability to walk to train station, etc. We opted to move about 1 mile south and moved into an unincorporated section of town where our lots would be bigger and taxes would be around $5k.

It does feel like a smarter financial decision since we can still have access to the great schools in the area, but only pay for the bare minimum of services and treat the rest as optional. We pay a town next door to patrol the area and respond to 911 calls. We also don't pay for a park district or library, but that's not a big deal because we just use the park district and library in the next town over and pay as we need it.

The one thing I didn't consider is that people that move to unincorporated areas tend to want to be left alone so the neighborhood is not very vibrant. I though I would enjoy the privacy, but the neighborhood is a little too quiet and I wonder if we would've been better served just sucking it up and paying the higher taxes.

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Re: House buying- How to think about property taxes?

Post by jharkin » Wed Apr 05, 2017 6:34 am

So I looked it up OP and the average property tax rate in NJ is 2.19%.

Yep that's high.

But consider this... I live in Mass which is also considered an "expensive" state but we are still nowhere near where you are at. Our state average is 1.19%, and I live in an expensive town where its ~1.7% I think. (adjusts every year, some years it has even gone down).

However.... The reason is so 'cheap' relatively for us is that we have a law called Proposition 2 1/2 that since the 80s limits annual increases to no more than 2.5% of the previous years total tax revenue. Sounds great right? Well, the problem is that for many of those years inflation was far higher and being such a high cost to live state overall, the towns expenses kept going up while the tax revenues didn't keep up. Yes our taxes are higher than the example of Virginia above, but cops, teachers and even the garbage collectors probably get paid a lot more. Road projects cost more here. Construction costs and utilities to keep the school buildings open cost more here. and so on..

Along the way to make ends meet services got cut. When it gets bad enough they have to have a special override vote to approve an increase that exceeds 2.5. My town put off replacing the water mains for so long (the existing system is all asbestos cement pipe installed in the 60s/70s) it eventually got to the point where they have to spend something like $10-20 million (in a town of 20k people) and had to pass a special $300/household water bill surcharge for a decade to start financing it.

Some of our roads look like the third world.

We have a public school system that US News ranks #1 in the country but more and more of it is getting financed by fees to the parents of enrolled kids. My child's kindergarten teacher has to hold fund raisers and ask for donations for room supplies! I actually have to pay tuition (to the public school) for the full day program. Lots of families pay for the bus. etc.


So pick your poison. Remember the old rule - you can have cheap, good or fast. pick any two :annoyed

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