Are you buying a house in New York, but forgetting to calculate your full monthly nut? Mortgage payments are not the only bite out of the monthly payments that New York Homeowners and buyers make every month. Aside from the principle and interest payments, mortgage holders must pay real estate taxes and homeowners insurance, thereby increasing the monthly nut.
Among the assessments that new homeowners forget about are unanticipated reassessments or rate hikes, supplemental bills where there were “exemptions” for the prior owner, and significantly higher taxes because of such re-apportionment. When considering the purchase of any home, you should contact the local building inspector and the local tax assessor’s office to find out and research the current issues that might effect future taxes and the assessments of the home you are buying.
Property taxes are almost always based on the value (assessment) of the home, and such value can go up and down, but does not typically fluctuate.
Beyond that, each state or locality typically uses its own peculiar formula to calculate property taxes. These formulae introduce a certain amount of complexity and unpredictability into property taxes.
Ask your attorney or the assessor, how property tax is calculated; whether the home will be reassessed upon transfer to you; when the next scheduled reassessment will occur in the town, county or village you are buying in; whether the current owner has any “exemptions” or rebates that might limit their tax bills (or increase yours); whether you might qualify for tax relief of some type.
Bottom line: the real estate broker’s estimate of the tax may not be completely accurate because the current owner may have taxes that will be lower than yours after the transfer. While the tax bill might provide information, you should check with the assessor to find out hidden post-sale reassessments, which might result in a substantially higher tax. For example, sometimes, there may be several property tax authorities seeking payment, including counties, cities and special districts, such as local water, sewer or school authorities.
The transfer itself, or prior unauthorized remodeling of the home may not be contained within the present tax picture and can trigger a reassessment because additional bathrooms, central heating, ventilation and air-conditioning and other capital improvements can increase the assessment.
Tax and Insurance Escrows.
As a matter of course, most lenders require new home owners to establish an escrow account, setting aside monies to cover the taxes and insurance when due. The escrow is established by estimating the amounts due annually, then dividing it by 12 monthly installments, and then banks pay the property taxes and insurance directly.
Many New York State taxing authorities are now required to provide homeowners notice that their taxes have been paid. Alternatively, it is important to keep a close watch over the disbursements, because loan servicers sometimes fail to make the payments.
Tax assessments on residential property is usually a function of recent assessed value or sales price of the home; value of comparable homes; improvements; exemptions for which the home, home buyer, or homeowner qualifies; and property tax rates. If one of those is incorrect or improper, there is generally an appeals or “grievance” process by which the homeowner can appeal the assessment. In New York, the date is generally the third Tuesday in May, but you should check with your attorney to be sure you file your grievance timely.
The bottom line–Property taxes are unpopular but the revenue generated pays for schools, libraries, fire departments, police officers, street lights and many other public benefits– they are part of life in Dutchess, Rockland, Westchester and Columbia County. Learn to plan for them, and fight them if they are wrong.