Property Taxes in Rochester May 2019
Property Taxes in Rochester May 2019
Transcription:
Hi, everyone. I’ve got an exciting topic for you today. It’s actually about property taxes and how that can affect you either as a home buyer or a home seller. I know it’s kind of a big topic that’s been brought to my attention here over the last three to four weeks. I know a lot of people here in Olmsted County got their property taxes from 2018 to 2019 and estimated increase for most people in town was somewhere around 26%, so double-digits tax, property tax increase. It’s a big burden to shoulder. I want to explain to you what that means and how property taxes really affect the home buying and selling process overall.
First thing I want to talk about is from 2018 to 2019, Olmsted County said that there were property taxes for people that reached anywhere from 10% to 76%. You can imagine being the person who had to deal with a 76% property tax increase. The reason why it’s important to pay attention to what property taxes are is for a lot of buyers they’re actually doing less than the 20% down. Most lenders are going to require that you put, keep certain money aside into a escrow account monthly so that you can actually pay those taxes off. The lender is making a couple investments at the same time. First one is a used buyer and the second one is in the property. Right?
As a buyer, they want to make sure that your debt to income ratio is sufficient. They’re going to look at your total income. They’re going to look at your total debts, and they’re going to calculate what they think is good for you to have for a monthly payment to afford your next home. Well, they’re going to take taxes, insurance, and mortgage insurance into consideration when they calculate what it is that they think that would qualify for a monthly mortgage payment. Which is why oftentimes the very first question I hear from a lender when I find a house for a buyer that they love is, what are the property taxes?
I want to talk about that just a little bit more closely. If you were looking at two properties, but one property actually had $600 more a year in annual property tax. What that means is with that escrow account is they’re going to divide that $600 by 12. $50 a month more is going to go into your escrow account. Well, because of that, that could actually decrease your pre-approval amount because they’re looking at that total expense that you’re going to actually have to have out of pocket. You could see a decrease in what you can actually afford in certain properties. Why that’s important to understand is historically when I had buyers who were looking in Rochester, Byron, [Casin 00:02:18], Orono, [inaudible 00:02:19], some of these outskirt towns.
Historically, I’ve had more expensive property taxes. I always want to make sure that they’re aware of these things because at the end of the day, you could buy a house here in Rochester at the same price or at least back then at the same price that you would in Byron, but because the tax are $600 more, your monthly mortgage payment will be $50 more per month. This is just something that you want to make sure you take into consideration definitely as a buyer. Now as a seller, when you go to sell, people are going to be looking at these things as well. In fact, I will tell you I do have a couple of sellers who are looking to sell simply because the property taxes did go up.
This is something that does hit a nerve with certain people, but at the end of the day if you are a seller and the property taxes have gone up in your neighborhood, that means that the amount of buyers who were qualified to purchase your home has actually decreased because they’re no longer pre-approved at the same amount as what they were six, seven months before we had the property tax increase. It is a big deal, and it’s something we definitely want to pay attention to. There’s a couple other things I want to talk about with property taxes too.
First, I want to explain the different between homestead and non-homestead taxes. First off, the city is going to tax you differently based off of how you utilize your home. Right? Most people are going to intend to own and occupy so your taxes are actually going to be a little bit more inexpensive. You have to own and occupy by December 1st, and then you have to have the paperwork in by December 15th at the latest. If you’re one of my clients, you get a home call from me in November reminding people to do it. I still today every year have people who forgotten to do that, to report people. Just go down to the recorder’s office and that taken care of right away.
If you forget to file in a non-homestead … in homestead taxes, you will actually immediately go into a non-homestead tax status. It’s important to make sure you get that document in there. A non-homestead property tax could be $400 or more a year in property taxes. At the end of the day, that could affect what your monthly payment is going to be. At the end of the day, as a buyer if you purchase a home that is currently non-homestead taxes, you want to make sure you write in the contract that you want the seller to pay the difference between homestead and non-homestead, or you may into the first year at least get stuck with the non-homestead tax status there overall.
The last thing I want to talk about is assessment balances. They do have it from time to time. I’ve seen them range from $27 to $11,000. It can be a big expense there and it’s something that’s often overlooked in real estate, so I want to make sure people are at least touching base on this. This is if the city decides that they want to put in a new playground, if they want to put in a new sewer system, and they want to put in a new sidewalk. Well, they’re going to put in the costs of those expenses on you as a homeowner to pay for that. You don’t really get a vote in it, but you’re just going to get hit with that bill, and you’re going to have to pay that. Now, you can either pay that all in full, or you can amortize it over the course of X amount of years depending on what it is that the county wants to set that up as.
At the end of the day, if you’re a buyer and you purchase a home that currently has an assessment balance there, there is room for negotiation. Sometimes you got to pay all of it. Sometimes you get half, and the buyer agrees to pay half. Sometimes you just amortize it again. I just want to make sure that I touch base on those things. Property taxes are important to pay attention to. In fact, I would say that they are critical because this is something that is going to affect what your monthly payment is going to be. The reality is taxes historically only go up. That could change. I don’t know. I don’t have a crystal ball, but at the end of the day, taxes historically go up.
A lot of people get confused from one year to the next year. Their monthly mortgage payment went up, and they think something went on there. It’s not about your rate. It’s not about the principle. It’s about taxes and insurance. These things typically only go up. I just want to make sure that getting people a little bit of a heads up on what’s going on here in Rochester and what that could potentially mean for you. This is Alex Mayer from Counselor Realty buy and sell strategically.
Video Transcription
Speaker 1: Hi, everyone. I’ve got an exciting topic for you today. It’s actually about property taxes and how that can affect you either as a home buyer or a home seller. I know it’s kind of a big topic that’s been brought to my attention here over the last three to four weeks. I know a lot of people here in Olmsted County got their property taxes from 2018 to 2019 and estimated increase for most people in town was somewhere around 26%, so double-digits tax, property tax increase. It’s a big burden to shoulder. I want to explain to you what that means and how property taxes really affect the home buying and selling process overall.
First thing I want to talk about is from 2018 to 2019, Olmsted County said that there were property taxes for people that reached anywhere from 10% to 76%. You can imagine being the person who had to deal with a 76% property tax increase. The reason why it’s important to pay attention to what property taxes are is for a lot of buyers they’re actually doing less than the 20% down. Most lenders are going to require that you put, keep certain money aside into a escrow account monthly so that you can actually pay those taxes off. The lender is making a couple investments at the same time. First one is a used buyer and the second one is in the property. Right?
As a buyer, they want to make sure that your debt to income ratio is sufficient. They’re going to look at your total income. They’re going to look at your total debts, and they’re going to calculate what they think is good for you to have for a monthly payment to afford your next home. Well, they’re going to take taxes, insurance, and mortgage insurance into consideration when they calculate what it is that they think that would qualify for a monthly mortgage payment. Which is why oftentimes the very first question I hear from a lender when I find a house for a buyer that they love is, what are the property taxes?
I want to talk about that just a little bit more closely. If you were looking at two properties, but one property actually had $600 more a year in annual property tax. What that means is with that escrow account is they’re going to divide that $600 by 12. $50 a month more is going to go into your escrow account. Well, because of that, that could actually decrease your pre-approval amount because they’re looking at that total expense that you’re going to actually have to have out of pocket. You could see a decrease in what you can actually afford in certain properties. Why that’s important to understand is historically when I had buyers who were looking in Rochester, Byron, [Casin 00:02:18], Orono, [inaudible 00:02:19], some of these outskirt towns.
Historically, I’ve had more expensive property taxes. I always want to make sure that they’re aware of these things because at the end of the day, you could buy a house here in Rochester at the same price or at least back then at the same price that you would in Byron, but because the tax are $600 more, your monthly mortgage payment will be $50 more per month. This is just something that you want to make sure you take into consideration definitely as a buyer. Now as a seller, when you go to sell, people are going to be looking at these things as well. In fact, I will tell you I do have a couple of sellers who are looking to sell simply because the property taxes did go up.
This is something that does hit a nerve with certain people, but at the end of the day if you are a seller and the property taxes have gone up in your neighborhood, that means that the amount of buyers who were qualified to purchase your home has actually decreased because they’re no longer pre-approved at the same amount as what they were six, seven months before we had the property tax increase. It is a big deal, and it’s something we definitely want to pay attention to. There’s a couple other things I want to talk about with property taxes too.
First, I want to explain the different between homestead and non-homestaed taxes. First off, the city is going to tax you differently based off of how you utilize your home. Right? Most people are going to intend to own and occupy so your taxes are actually going to be a little bit more inexpensive. You have to own and occupy by December 1st, and then you have to have the paperwork in by December 15th at the latest. If you’re one of my clients, you get a home call from me in November reminding people to do it. I still today every year have people who forgotten to do that, to report people. Just go down to the recorder’s office and that taken care of right away.
If you forget to file in a non-homestead … in homestead taxes, you will actually immediately go into a non-homestead tax status. It’s important to make sure you get that document in there. A non-homestead property tax could be $400 or more a year in property taxes. At the end of the day, that could affect what your monthly payment is going to be. At the end of the day, as a buyer if you purchase a home that is currently non-homestead taxes, you want to make sure you write in the contract that you want the seller to pay the difference between homestead and non-homestead, or you may into the first year at least get stuck with the non-homestead tax status there overall.
The last thing I want to talk about is assessment balances. They do have it from time to time. I’ve seen them range from $27 to $11,000. It can be a big expense there and it’s something that’s often overlooked in real estate, so I want to make sure people are at least touching base on this. This is if the city decides that they want to put in a new playground, if they want to put in a new sewer system, and they want to put in a new sidewalk. Well, they’re going to put in the costs of those expenses on you as a homeowner to pay for that. You don’t really get a vote in it, but you’re just going to get hit with that bill, and you’re going to have to pay that. Now, you can either pay that all in full, or you can amortize it over the course of X amount of years depending on what it is that the county wants to set that up as.
At the end of the day, if you’re a buyer and you purchase a home that currently has an assessment balance there, there is room for negotiation. Sometimes you got to pay all of it. Sometimes you get half, and the buyer agrees to pay half. Sometimes you just amortize it again. I just want to make sure that I touch base on those things. Property taxes are important to pay attention to. In fact, I would say that they are critical because this is something that is going to affect what your monthly payment is going to be. The reality is taxes historically only go up. That could change. I don’t know. I don’t have a crystal ball, but at the end of the day, taxes historically go up.
A lot of people get confused from one year to the next year. Their monthly mortgage payment went up, and they think something went on there. It’s not about your rate. It’s not about the principle. It’s about taxes and insurance. These things typically only go up. I just want to make sure that getting people a little bit of a heads up on what’s going on here in Rochester and what that could potentially mean for you. This is Alex [inaudible 00:05:52] from realty buy and sell strategically.