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Property Taxes
So I am not quite ready to purchase a home, but we still look around quite a bit to see what's out there, and we are trying to understand exactly how the process works to make sure we are fully prepared. One area that we are looking at has ridiculously high property taxes. In particular, one home has an assessed value for property taxes way over the asking price, which I assume would be closer to the value? I have heard that you can file a grievance with the town or petition to adjust the assessed value after closing. Does anyone have experience with this? I would like to get an idea if this was possible before closing, but that doesn't seem like it's an option, right?
I think we would also be required to pre-pay some property taxes, or reimburse the seller for the taxes they've paid (not sure on this exactly), but would we get a refund if we successfully lowered the assessed value?
I know we would not buy a house if we couldn't easily afford the payment, including taxes, I am just clueless on how the property taxes work 
Thanks!
Re: Property Taxes
We got lucky and the fall after we bought our house the county had completed a detailed home evalutation of all the houses in the county which I guess they do every 6 years. If after receiving the new home valuation you didn't like it you could contest it. But you would basically have to provide a recent appraisal done by an independent party to show them what they felt the house was worth. So for most people it would mean hiring an appraiser. For us we had bought our house in the spring and the appraisal that we had one was done during the time frame that was acceptable so we didn't need a new one. The county had a few open days where you could come & state your case so I took all my paperwork from my sale of the house & the appraisal and was able to get the value of my home for tax purposes dropped about $40,000. So it's been great. Now this is only a six year break. It will be re-evaluated in six years and if I disgree with the new value I'll have to hire an appraiser and go back to argue my case. I don't think it will be worth it because we had our home re-evaluated for a home equity loan and the value of the home has gone up a lot already due to the work we've done to the home. We didn't have to pay the seller any refund because it was for taxes going forward because the new value went into effect at the 1st of the new year after the valuation was done.
I would recommend calling the county auditors office and talking to them to find out if home values can be contested prior to county wide re-evaluations & if so how do you go about doing that. If not, find out when the next re-evaluation would be and what is involved with that.
One other thing we are doing to protect ourselve with future tax changes & changes in the home value is we are paying monthly what the mortgage would have been at the original value. I have the extra applied to the principal of the mortgage. As the taxes change, we'll just being less extra towards the principal. But at the very least, we've got a six year tax break and making double prinicple payments on our mortgage for six years which will help us to pay off the house sooner.
How counties handle property taxes can vary A LOT. It can even vary a lot from one county to the next, even within the same state. Though the majority of the time you can't dispute the assessment unless you own the house AND there is typically a window of time when assessments can be disputed.
Also look into Homestead Exemptions. Most areas offer them, though if your sellers live in the house, they probably already have one (if available). A Homestead Exemption basically subtracts a value off the value of your home and that basically then makes your taxes cheaper.
Here is an example. In my state (Louisiana), the Homestead Exemption (HE) is $75,000. So, if I bought a house assessed at $175,000. The HE subtracts $75,000 from that and so my property tax would be based on $100,000 instead of $175,000.
The closing amount for my property taxes when I bought my first home four years was pretty much a god awful, worst case scenario. I'm not exaggerating. It is about as bad as it can get, but hopefully you can learn from it and get an idea of how property taxes and closings work and where it can go horribly wrong.
1. Orleans parish (what we call counties) is the ONLY parish in the entire state of Louisiana where property taxes are paid ahead of time instead of for the prior year. Remember how I talked about how even counties right next to each other can vary greatly?
a) this meant I had to pay back the seller (a bank) at closing for the 7 months of property taxes they had already paid. My closing was in May, hence the 7 month pay back. However, if the property taxes in the county you are buying in are paid in arrears (for the previous year), then the seller will have to give you money towards the property taxes.
2 I bought a foreclosure. Which meant a banked owned the property before I did. Which meant there was no Homestead Exemption. And apparently my parish will not prorate an HE. So, although I was eligible for an HE on my first FULL year I owned the property, I basically had to pay the non-HE rate for those 7 months I owned the property in the partial year. That was an $875 difference I was expecting to get back from Orleans Parish and didn't. Major, major suckage.
3. If the bank you have your mortgage through pays the property taxes for you...and most of them do...then they will typically require you to potentially pay the first year's property taxes PLUS an additional 9-12 months of property taxes into your escrow account with them.
4. And....oh...guess what property tax rate my bank used that I needed to bring to closing to pay the NEXT year's property taxes...PLUS my escrow...in addition to the 7 months I was already paying back to the seller. That's right. It was based yet again on that non-HE rate. My property taxes with the HE are about $600/year...without it, they are $2100/year. So it was a substantial difference.
5. I ended up having to bring close to $4,000 to closing JUST for all the property tax stuff....for my actual property taxes that ended up being only $600/year once I filed my HE and disputed the assessment. I forgot, I also filed for an appeal on the assessment, because it was more than double what it should have been...but that also only helped me for the next year's tax rate.
6. I did end up getting $1800 back from my bank in regards to my property tax escrow because I had been SO overcharged at closing. But that money didn't come back to me until February of the next year...nine months after I closed.
7. In my parish, tax assessments can only be disputed during the two weeks from Aug. 1-Aug. 15. They don't give two s**ts what your circumstances are or when you bought your house. That is the blanket time frame for everyone to dispute their assessment, if they wish. No exceptions. And yes, I stood in line one year for eleven hours. Really. ELEVEN EFFING HOURS to dispute my assessment, because two weeks is way too short a timeframe to even remotely handle everyone. But at least I was mostly successful.
The Homestead Exemption can be filed for at any time...at least where I live. But again, it only takes effect for the NEXT tax year.
Oh! And now for more practical advice
. Not only talk to your county's tax assessor's office, but your mortgage broker/banker should also be able to give you a plethora of information on this issue, as well.
For example, I may not have liked it, but I did know well ahead of time how the tax situation was going to work out. The only part that was really unexpected and a sucker punch was thinking Orleans parish was going to reimburse me back $875 for the overage I paid. Everyone...my realtor, my banker, even the title company...told me that was how it would work once I filed for my HE...but, alas, no.
The assessment took a very long time. The tax assessor had until September to get it done, and we had filed the appeal in February of that year. We ended up having to follow up in September and file against them for not completing it within the required timeframe. Then they moved quicker and it was appraised in October. The assessment didn't get adjusted until November. So we had to pay for those months of the higher assessment, even though we were fighting the value.
It also didn't not get assessed for the amount we paid nor the current appraisal. They came back with it at $110k. We did have the option to fight it again, but at that point we had done a lot of work to the home and knew it wouldn't appraise in our favor.
So keep in mind that it is very possible it will not come back at the amount you paid for the home, it can take a long time to get the value adjusted, and you have to stay on top of them about it.
I would recommend to make sure you can afford the current taxes and higher. It's possible that you try to fight it and they do not come down, or it appraises for higher.
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Whoa! That timeframe is insane! And I was complaining about having to wait in line for eleven hours. But they at least do the assessment while you are literally right there with them.
I had a similar situation to you all with amounts that were way off, though not quite as bad. I bought my house for $81K and it appraised for $125K...but the assessment was $210K.
I went during the Aug. timeframe when homeowners can dispute assessments. Brought my closing paperwork, including my appraisal that was less than 4 months old. I thought they would at the very least bring it down to the appraisal amount of $125K. Nope! They only brought it down to $135K, but at least it was still a big improvement over the totally ridiculous $210K.
Our city keeps passing school levies so our property taxs have risen since we've lived here. Keep this in mind that while your mortage rate and payment will stay the same, and so will your home owner's insurance, your overall mortgage payment could increase due to a variety of things on the tax/assessment front.
At our first home, the monthly mortgage payment went up $150 due to assessments from the first year to the second. I few of my mortgage-poor neighbors were pinched by that $100. Don't be like that by buying too much house.