Archive for the ‘Property tax’ Category

How the New Tax Reform Could Effect Real Estate

Thursday, September 28th, 2017

If you own a home or are thinking about purchasing one, you need to be aware of how the new proposed tax reforms could effect you and the effect they may have on the real estate market. Here are some of the proposed changes:

Tax Increases/Doubling of the Standard Deduction. Taxes could increase for hundreds of thousands of California homeowners, and this will hit the middle class hard. It would also put homeownership out of reach for many buyers.

Recently the National Association of Realtors stated that increasing the standard deduction and erasing others would “effectively nullify the current tax benefits of owning a home” for the majority of people. This could reduce housing demand and home values.

Elimination of State and Local Tax Deductions. These deductions make home ownership more affordable. This could include property taxes, and if implemented homeowners could see a rise of up to $3000 annually, leading to plummeting home values. Potential buyers may not be able to afford property tax increases, pushing them into lower price ranges. Homeowner equity would suffer.

If these new tax laws are implemented it will be a big hit to the housing market, with home purchases slowing  or even grinding to a halt; more importantly, we could face large foreclosures waves heading into the future, which of course could have big implications for the mortgage and banking industries.

Hopefully we will soon see some clarification regarding these proposed changes. Write your Congressional representatives and express your views on the new tax laws. Unless you exist in the 1% of the uber-wealthy you will not likely benefit from the expected changes.

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Everything You Need to Know About California Property Taxes

Wednesday, February 3rd, 2016

With the deadline for payment of the second installment of property taxes already here, here is some helpful information for all property tax payers: taxman

Annual property tax bills are sent out once a year, on October 1, and are payable in two installments. The first installment is due November 1 and is delinquent if not received by 5:00 PM on or postmarked by December 10. The second installment is due February 1 and is delinquent if not receive by 5:00 on or postmarked by April 10. A 10% penalty fee is assessed for delinquency on the first payment, plus a $10 fee is assessed for a delinquent payment on the second payment.

Home buyers: If you close escrow on a house after the tax bills have been issued to the seller in the Fall, you will not receive an additional copy or second reminder before the second installment is due, but you are still liable. Futhermore, the bill(s) you may have from the previous owners may not have your name on them, but you are still liable. If you do not have the bills or have any questions, please see below to contact your county tax assessor.

PAYMENT DEADLINE SUMMARY

Installment          Due Date          Delinquency Date       Penalty (if delinquent)

1st: November     December 1      December 10               10% of amount due

2nd: February      April 1               April 10                        10% of amount due + $10

TAX PERIOD COVERED BY EACH INSTALLMENT

1st installment: Covers taxes from  July 1- December 31

2nd installment: Covers taxes from January 1- June 30

Changes: Keep in mind that most counties have a cutoff time in which to make changes, which is around March in the year the bills are sent. If you have any questions please contact your local tax assessor’s office.

Tax Assessor Offices from Los Angeles to San Diego Counties:

San Diego County Tax Assessor

Los Angeles County Tax Assessor

Orange County Tax Assessor

San Bernardino County Tax Assessor

Riverside County Tax Assessor

Supplemental Tax Bills: You may receive a supplemental tax bill during your first year of ownership of a home. The supplemental bill covers additional taxes owed based on the purchase price of the home (as property taxes are calculated on sales price in California). Please note that supplemental tax bills are not paid out of the lender impound account, and it is the responsibility of the new owner to pay them upon request.

Thank you to Chandra Self of Eaton Escrow for contributing the above information!

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Beware: Property Taxes on Your New Home Could be Higher Than Anticipated

Wednesday, January 23rd, 2013

An investor client called me a few weeks ago and told me that the county assessor sent him property tax bills for an amount higher than the standard 1.25% on his recently purchased property. He didn’t understand why the taxes were higher, and needed advice on what he should do.

Most real estate agents correctly tell their buyers that property taxes in California are approximately 1.25% of the sales price, give or take a little depending on the specific location of the property. Normally this is sound advice. But what some agents do NOT know is that the assessor’s office has discretion to raise the property tax on your newly acquired property if it feels that you paid a low price. So your “great deal” may not be reflected in your taxes.

In all my years of selling real estate this is the first time I have seen this happen, which tells me that the assessor’s office is either starting to heavily scrutinize sales and related comparable sold properties, or that my client was very unlucky. One of his purchases was really an amazing buy, but the other fell in line with comparable sold properties.

Under California state law, Proposition 13, property is reappraised only when there is a change in ownership, or upon completion of new construction. Aside from these two situations, property taxes cannot be raised more than 2% annually. The tax rate in California is 1%, plus the costs of any additional fees, bonds, or special charges (thus the reason why agents tell their buyers taxes are “about” 1.25% – some areas/neighborhoods may have slightly higher or lower tax rates, depending on the additional fees, such as mello roos taxes, bonds, etc.).

Once a property changes ownership, the assessor determines whether the property needs to be reappraised. If an appraisal is ordered and comes in higher than the value the new buyer paid, the taxes will be assessed based on the appraisal. Note that a transfer between husband and wife does not require a reappraisal for property tax purposes, including those transfers resulting from death or divorce, nor does a refinance.

So what can a homeowner do upon receipt of a higher than anticipated property tax bill? The homeowner can appeal the value of his new taxes. Go to the assessor’s website and find out the steps for doing so, then get started. Keep in mind that it can be a drawn out process, but do not give up. Be sure you have all related comparables, and can show why those properties do or do not compare to yours – extra photos can help. Be prepared to really compare each one – I advise you use your real estate agent to assist you with this.

For further information on this and answers to related frequently asked questions in the San Diego county area, click here.

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As Home Prices Rise, So May Your Property Taxes

Thursday, September 13th, 2012

The decline in the real estate market these last several years led many California homeowners to seek reductions in their property taxes. All they had to do was show the decline in market value of their homes, via a comparative market analysis, and local tax assessors were generous in granting annual reductions. BUT… now that prices are increasing, homeowners must realize that so too can their property taxes.

Normally property taxes do not increase more than 2% annually, thanks to the voter-approved Proposition 13 (also passed by voters in 1978). However, just as assessors have the authority to temporarily reduce taxes when property values go down, so can they increase taxes, even more than 2%, when the values come back up (Proposition 8, 1978).

The 2% limit outlined in Proposition 13 only takes effect when the value of the property reaches the level it would have reached had the market never dropped. There are areas in California that have already been subject to tax increases.

If you live in an area that has seen market value increases, and you have had a property tax reduction, be prepared for possible property tax increases soon. It may not be welcome news to you, but it is good news for your county and the economy to see these improvements in the housing sector.

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What in the World are “Mello-Roos?”

Saturday, January 22nd, 2011

Mello-Roos taxes are common in many areas of California, so if you are buying a home that is newer you should know what they are. Many people do not understand the purpose behind them, or why they have to pay them; in fact, it is a question many buyers have asked me over the years. Here is what you need to know about mello-roos, in a nutshell.

Definition: Mello-Roos are fees paid by a homeowner that are assessed by the builder. They enable the formation of Community Facilities Districts (CFDs), which provide community funding for public improvements and maintenance. The CFDs decide where the collected money will go.

History: Mello-Roos (named after a Senator and Assemblyman who coauthored the Community Facility Act in 1982, which is now simply referred to as “Mello-Roos”) are assessed by the local CFD. If a new community or a school is planned in your CFD tax exempt municipal bonds are issued to finance the construction.

Benefits: Mello-Roos taxes are used to fund and maintain projects within your community, such as road improvements, traffic lighting, storm sewers, libraries, emergency services and schools. By passing the taxes on to the homeowners the builders can keep the cost of housing lower, and owners benefit from having well-maintained communities.

Payment termination: These bonds are paid off over a period of time, usually 25 years. Once they are paid off the taxes stop. If the home is sold before they are paid off the taxes transfer to the new buyer.

Tax Increase or Decrease: Mello-Roos can only increase at a maximum rate of 2% per year over a 25 year period. It is possible that the tax may also decrease over that time. If state or other funds become available the bond indebtedness can be reduced, which could lower residence tax payments. Although I do not see indebtedness being reduced in California any time soon, keep in mind that it could happen.

How to Pay: There are several ways to opt to pay your Mello-Roos tax bill. It can be added to annual property tax or paid upfront upon the purchase of a new home. The latter option may not make sense unless the owner knows he or she will be living in the home for a long time.

In conclusion, although people may complain about Mello-Roos taxes the benefit to you as a homeowner are plentiful. Think of them as insurance that your community will look it’s best and be a better place to live.

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Property Tax Bills May Go Down

Monday, July 5th, 2010

Good news for California homeowners: there is a good chance your property tax bill will decrease this year.

Proposition 13, which puts a cap on the maximum amount property tax bills can be raised, is to thank; it prohibits property taxes from rising more than 2% annually. This number is based on the Consumer Price Index, which documents increases in the overall cost of living (thus the increase is not based on home value exclusively).

Notices regarding changes in value are usually sent out mid-July, so look for those to see if there is a new, lower valuation on your property. If you still feel your property value is lower you can apply with the county Assessor’s office for a request for review of valuation.

The total assessed home value in San Diego has declined by approximately 1.56%. Make sure to check your home value and see if you will get a slight break this year on property taxes.

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