lower house price vs lower property taxes

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Nyc10036
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lower house price vs lower property taxes

Post by Nyc10036 »

There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
Pre-pandemic, the houses in the community with the higher property taxes have generally been lower
even though they are slightly bigger.

All else being equal --- I know they never are --- but if they are,
does it make more sense to choose one over the other?
exodusNH
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Re: lower house price vs lower property taxes

Post by exodusNH »

Nyc10036 wrote: Wed Jun 22, 2022 6:42 pm There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
Pre-pandemic, the houses in the community with the higher property taxes have generally been lower
even though they are slightly bigger.

All else being equal --- I know they never are --- but if they are,
does it make more sense to choose one over the other?
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
Broken Man 1999
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Re: lower house price vs lower property taxes

Post by Broken Man 1999 »

Where are you looking at the properties?

In Florida and California, perhaps other states, taxes can be more related to the time the property has been held by the current resident than anything else.

Property tax caps can wildly distort current taxes being paid.

My next-door neighbor pays four times what I pay. My tax Increases have been capped since the start of the program, his only 10.years or so.

Broken Msn 1999
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tennisplyr
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Re: lower house price vs lower property taxes

Post by tennisplyr »

Huge difference, I’d go with the lower one unless you have significant reason for the other.
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Olemiss540
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Re: lower house price vs lower property taxes

Post by Olemiss540 »

exodusNH wrote: Wed Jun 22, 2022 6:48 pm
Nyc10036 wrote: Wed Jun 22, 2022 6:42 pm There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
Pre-pandemic, the houses in the community with the higher property taxes have generally been lower
even though they are slightly bigger.

All else being equal --- I know they never are --- but if they are,
does it make more sense to choose one over the other?
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
4% average increases YOY seems almost like inflation adjustments to property taxes right? Percentage has your property value changed over that 17 year span?

OP, I would go for the property I liked better given life is short (especially for someone shopping these communities). Now if they were closer to the same price I would definately pick the one with lower assed values/tax rates. Are the local sales tax rates the same? Se level of community services and quality of like at both communities?
Last edited by Olemiss540 on Thu Jun 23, 2022 7:18 am, edited 1 time in total.
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bob60014
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Re: lower house price vs lower property taxes

Post by bob60014 »

"One has property tax of $6985"

Is this new construction where the full taxes may not have been applied yet?
Jags4186
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Re: lower house price vs lower property taxes

Post by Jags4186 »

Simple math exercise, no?

$69,000 on a 30 year mortgage at 6% is $414/mo. $414*12 = $4968 + $6985 = $11,953 < $12,039.

From a cashflow perspective, it's cheaper to get the more expensive home with the lower property taxes.
scophreak
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Re: lower house price vs lower property taxes

Post by scophreak »

At least in my area, property taxes are "reset" (i.e. reassessed) based on the sale price. If the property has been held by the same owner for a lengthy period, the property tax increase can be quite significant. Of course the new assessment can be challenged, but it becomes hard to argue that the "market value" of the property is lower than what the new owner just paid. In the situation that OP describes it may be likely that the "higher" value property may indeed be in store for such an increase, and I would look very closely at this prior to purchase.

In summary, it can be a mistake to assume that your property taxes for a new property will be the same as the current owner.
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BrooklynInvest
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Re: lower house price vs lower property taxes

Post by BrooklynInvest »

Had a similar dilemma with a co-op when I was buying years ago. One thing to point out -

All other things being equal (I know) given both are likely to increase over time the higher property value is an asset that ultimately compounds in your favor. The same principle works in reverse with the taxes.

Good luck OP!
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Nyc10036
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Re: lower house price vs lower property taxes

Post by Nyc10036 »

I live in the same town as House #1.
We have had a lot of new construction with children in the school district being "unhoused".
Not enough classrooms.
The property taxes are bound to go up.
The disparity may eventually lessen.
But who knows?
exodusNH
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Re: lower house price vs lower property taxes

Post by exodusNH »

Olemiss540 wrote: Thu Jun 23, 2022 7:16 am
exodusNH wrote: Wed Jun 22, 2022 6:48 pm
Nyc10036 wrote: Wed Jun 22, 2022 6:42 pm There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
Pre-pandemic, the houses in the community with the higher property taxes have generally been lower
even though they are slightly bigger.

All else being equal --- I know they never are --- but if they are,
does it make more sense to choose one over the other?
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
4% average increases YOY seems almost like inflation adjustments to property taxes right? Percentage has your property value changed over that 17 year span?
Mostly, yes. I was pointing out that you can never escape a recurring monthly payment on a house.

Starting lower is better, but as someone else pointed out those taxes may reset on sale. Property taxes in NH (and I think MA) don't work that way -- they're based on a periodic town-wide assessment, typically every 5 years. There's no escaping the adjustments, which is fine since it's more fair. There is a small discount for seniors below a certain income are eligible for.
JackoC
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Re: lower house price vs lower property taxes

Post by JackoC »

exodusNH wrote: Thu Jun 23, 2022 8:34 am
Olemiss540 wrote: Thu Jun 23, 2022 7:16 am
exodusNH wrote: Wed Jun 22, 2022 6:48 pm
Nyc10036 wrote: Wed Jun 22, 2022 6:42 pm There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
4% average increases YOY seems almost like inflation adjustments to property taxes right? Percentage has your property value changed over that 17 year span?
Mostly, yes. I was pointing out that you can never escape a recurring monthly payment on a house.

Starting lower is better, but as someone else pointed out those taxes may reset on sale. Property taxes in NH (and I think MA) don't work that way -- they're based on a periodic town-wide assessment, typically every 5 years. There's no escaping the adjustments, which is fine since it's more fair. There is a small discount for seniors below a certain income are eligible for.
This is a pretty CA-oriented forum it seems especially on real estate questions but AFAIK CA's system of reset on sale is very much the exception. In most places assessed value only changes for all properties at once periodically. And that only directly results in a tax increase if your property has appreciated more than average in that assessment district (the total required $ tax levy to run the town/city/county/schools is not a direct function of the total assessed value of properties, one might indirectly affect the other via the political process but that would tend into get into anecdotal griping about local politics). Where I live in NJ the last re-assessment was 8 yrs ago*, which was 25 yrs after the previous one. Over in the City assessments are a patchwork which hasn't been updated in many decades. Assessment and property tax for the same market value varies widely even in say Brooklyn, before comparing to other boroughs. But of course even Brooklyn would be (was at one time) a big city in its own right and prop tax for same market value can vary just as much among smaller towns/cities encompassing the same population.

You would figure a reasonably efficient RE market would compensate for stale assessments and big variations in prop tax as % of market value by adjustment in the market price, as perhaps true in OP's example.

*which did result in tax increase for us because 'brownstone' type SFH's had appreciated relatively more than other properties (mainly condo's) in the previous 25 yrs. Our tax went up, condo taxes went down. That was pretty much separate from the uptrend in property tax $'s over the last 35yrs which was a function of increase in cost to provide a given set of services, plus the indirect tendency for the voting public in a wealthier community (demographics changed a lot, market property prices skyrocketed), property owner and not, to accept higher than previous costs.
Last edited by JackoC on Thu Jun 23, 2022 9:27 am, edited 1 time in total.
exodusNH
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Re: lower house price vs lower property taxes

Post by exodusNH »

JackoC wrote: Thu Jun 23, 2022 9:11 am
exodusNH wrote: Thu Jun 23, 2022 8:34 am
Olemiss540 wrote: Thu Jun 23, 2022 7:16 am
exodusNH wrote: Wed Jun 22, 2022 6:48 pm
Nyc10036 wrote: Wed Jun 22, 2022 6:42 pm There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
4% average increases YOY seems almost like inflation adjustments to property taxes right? Percentage has your property value changed over that 17 year span?
Mostly, yes. I was pointing out that you can never escape a recurring monthly payment on a house.

Starting lower is better, but as someone else pointed out those taxes may reset on sale. Property taxes in NH (and I think MA) don't work that way -- they're based on a periodic town-wide assessment, typically every 5 years. There's no escaping the adjustments, which is fine since it's more fair. There is a small discount for seniors below a certain income are eligible for.
This is a pretty CA-oriented forum it seems especially on real estate questions but AFAIK CA's system of reset on sale is very much the exception. In most places assessed value only changes for all properties at once periodically. And that only directly results in a tax increase if your property has appreciated more than average in that assessment district (the total required $ tax levy to run the town/city/county/schools is not a direct function of the total assessed value of properties, one might indirectly affect the other via the political process but that would tend into get into anecdotal griping about local politics). Where I live in NJ the last re-assessment was 8 yrs ago, which was 25 yrs after the previous one. Over in the City assessments are a patchwork which hasn't been updated in many decades. Assessment and property tax for the same market value varies widely even in say Brooklyn, before comparing to other boroughs. But of course even Brooklyn would be (was at one time) a big city in its own right and prop tax for same market value can vary just as much among smaller towns/cities encompassing the same population.

You would figure a reasonably efficient RE market would compensate for stale assessments in the market price, as perhaps true in OP's example.
That's how it works here. I'm in a town with a large commercial base. The only wrinkle is that every few years we flip on whether residential or commercial appreciated more. Obviously the 2020 assessment had residential appreciate more; taxes on a typical single family home went up more than the average. I can't complain too much, though, because the assessment cycles since I bought have mostly favored commercial. My time to pay The Man.

Multifamilies got hit pretty hard because of investors driving up the prices more than SFH.

To get this back on course, the OP should check if the tax will reset on sale, or maybe the property is in some way encumbered that results in the lower taxes.
JackoC
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Re: lower house price vs lower property taxes

Post by JackoC »

exodusNH wrote: Thu Jun 23, 2022 9:22 am
JackoC wrote: Thu Jun 23, 2022 9:11 am
exodusNH wrote: Thu Jun 23, 2022 8:34 am
Olemiss540 wrote: Thu Jun 23, 2022 7:16 am
exodusNH wrote: Wed Jun 22, 2022 6:48 pm
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
4% average increases YOY seems almost like inflation adjustments to property taxes right? Percentage has your property value changed over that 17 year span?
Mostly, yes. I was pointing out that you can never escape a recurring monthly payment on a house.

Starting lower is better, but as someone else pointed out those taxes may reset on sale. Property taxes in NH (and I think MA) don't work that way -- they're based on a periodic town-wide assessment, typically every 5 years. There's no escaping the adjustments, which is fine since it's more fair. There is a small discount for seniors below a certain income are eligible for.
This is a pretty CA-oriented forum it seems especially on real estate questions but AFAIK CA's system of reset on sale is very much the exception. In most places assessed value only changes for all properties at once periodically. And that only directly results in a tax increase if your property has appreciated more than average in that assessment district (the total required $ tax levy to run the town/city/county/schools is not a direct function of the total assessed value of properties, one might indirectly affect the other via the political process but that would tend into get into anecdotal griping about local politics). Where I live in NJ the last re-assessment was 8 yrs ago, which was 25 yrs after the previous one. Over in the City assessments are a patchwork which hasn't been updated in many decades. Assessment and property tax for the same market value varies widely even in say Brooklyn, before comparing to other boroughs. But of course even Brooklyn would be (was at one time) a big city in its own right and prop tax for same market value can vary just as much among smaller towns/cities encompassing the same population.

You would figure a reasonably efficient RE market would compensate for stale assessments in the market price, as perhaps true in OP's example.
That's how it works here. I'm in a town with a large commercial base. The only wrinkle is that every few years we flip on whether residential or commercial appreciated more. Obviously the 2020 assessment had residential appreciate more; taxes on a typical single family home went up more than the average. I can't complain too much, though, because the assessment cycles since I bought have mostly favored commercial. My time to pay The Man.

Multifamilies got hit pretty hard because of investors driving up the prices more than SFH.

To get this back on course, the OP should check if the tax will reset on sale, or maybe the property is in some way encumbered that results in the lower taxes.
Yeah again if it's not CA and a few other places, reset on sale is unlikely. Otherwise, how often relative inequality in assessments gets ironed out varies widely, it's much less frequent here typically than where you are. Anyway as you say reassessment itself should only affect you to the extent your type of property appreciated faster/slower than another type. If all properties appreciated at around the same rate, there would be no big distortion in a 50 yr old assessment (places we own in Brooklyn, from the absolute $ numbers, must be at least that old), the 'millage' rate of $ tax per $ assessed would just gradually go up with increased municipal costs and whatever else the local voting public decides it wants. For our house in NJ, the increase due to the 2014 reassessment, because SFH's had appreciated more than other types in previous 25yrs, was quite small in the big picture of total nominal $ increase in taxes since we bought the house 30 yrs ago. In typical non-CA situation reassessments aren't a big deal in how much tax you pay. The big deal is rate of increase in municipal costs of given services and balance between local voters who prioritize more services and those who prioritize lower taxes. I'm not going to get into who is 'right' among those voters but that's the big variable for future property taxes, not the assessment process, in the system applying in most of the US outside CA.
LittleMaggieMae
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Re: lower house price vs lower property taxes

Post by LittleMaggieMae »

You can't compare the previously paid taxes to determine which house is a better deal.

You need to establish how much in property taxes YOU will be paying once you take ownership.

You need to look at how the property taxes are determined for each property,
And then you need to look at how the property will be assessed/the taxes calculated after you take ownership.

You can not rely on what tax amount was being paid previously to determine what you will pay.

for example:
I bought a house in Florida as an investment property - so no homestead (or what ever it's called for a primary home) discount/deduction/credit whatever it's called. The house had also been owned by the same family for 30 years and had a much lower total tax bill than other houses (not sure if it was the longevity of the ownership or a senior discount or something else.) I knew that would change with the sale.

MY property taxes would be dramatically different - no homestead (whatever) AND the property assessment would go up AND I would not have any other special discounts (senior discount what ever). I would NOT be paying anywhere near what the previous owner was paying...

The realtors AND my loan person kept using the "old" property tax amount to figure out what I would pay every month and how "affordable it was" with my numbers... yeah, no. I used my guessitmate for property taxes to see if I could "afford" the house. I could but my numbers were $150.00 a month HGHER than what everyone was telling me. And sure enough 3 months after closing my "mortgage" payment went up $80.00 and then another 5 months later (when the tax bill came) my "mortgage" went up another $60 a month (I was off by $10 in my guesstimate). All of that in the first year of ownership. I'm guessing quite a few first time homebuyers get an unpleasant surprise with their "mortgage" payment... Coming up with an additional $140 a month could be difficult. I was prepared for it.
mkc
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Re: lower house price vs lower property taxes

Post by mkc »

JackoC wrote: Thu Jun 23, 2022 9:11 am
exodusNH wrote: Thu Jun 23, 2022 8:34 am
Olemiss540 wrote: Thu Jun 23, 2022 7:16 am
exodusNH wrote: Wed Jun 22, 2022 6:48 pm
Nyc10036 wrote: Wed Jun 22, 2022 6:42 pm There are two houses in 55+ communities near me that I am looking at.

One has property tax of $6985.
The other has property tax of $12039.
The asking price of the first house is $69K more.
You can never escape property taxes. I'd go with the lower one now, and it will inexorably climb over the years. Over the last 17 years, mine have doubled with no increase in services.
4% average increases YOY seems almost like inflation adjustments to property taxes right? Percentage has your property value changed over that 17 year span?
Mostly, yes. I was pointing out that you can never escape a recurring monthly payment on a house.

Starting lower is better, but as someone else pointed out those taxes may reset on sale. Property taxes in NH (and I think MA) don't work that way -- they're based on a periodic town-wide assessment, typically every 5 years. There's no escaping the adjustments, which is fine since it's more fair. There is a small discount for seniors below a certain income are eligible for.
This is a pretty CA-oriented forum it seems especially on real estate questions but AFAIK CA's system of reset on sale is very much the exception. In most places assessed value only changes for all properties at once periodically.
Much of Texas reappraises every year, and the homestead exemption protection resets after a property sale. The homestead exemption prevents the assessed value (what taxes are based on) from increasing more than 10% per year. Some taxing authorities in Texas also freeze property taxes for over-65 and disabled veterans, so if these properties are in Texas, OP would be wise to check the appraisal districts to see what exemptions are currently in effect on the specific properties. The over-65 exemption, depending on current owner, could be a significant amount that would go away on sale.
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