Look Out For This: Property Taxes Can Surprise You When Buying A New Home

You may think you have a handle on the home-buying process, but there might can be some surprises waiting for you when you sit down to close the deal. In addition to closing costs, some new homebuyers are surprised to see an extra fee for property taxes.

Sometimes, the property tax price you saw on the online real estate ad is significantly lower than those listed on the final purchase docs. We recommend talking to your real estate agent to prepare you for all the final numbers.

Property Taxes Increase as Real Estate Values Go Up

Property values increase and decrease over time, but the property taxes aren’t automatically adjusted accordingly. Instead, property tax assessors adjust these numbers over longer spans of time, and those adjustments are most likely to occur due to a completed real estate transaction or when a property moves through a legal probate process.

The formula for determining the taxable value of a home is complicated, but most counties put a cap on the taxable value of a home. According to the Volusia County Property Appraiser’s website:

“The SOH is an assessment limitation, or “cap,” on increases in the assessed value of a homestead residence. Those increases are limited to 3% or the percent change in the CPI (Consumer Price Index), whichever is less. The “cap” goes into effect beginning the year a qualified homestead exemption is applied.”

So, if the home itself increases in value faster than 3% a year, the excess wouldn’t be taxable. However, these caps on property taxes are there to protect the homeowner from excessive property tax hikes. This is great for homeowners. However, it can lead to some confusion for homebuyers.

Here’s why.

How A New Home Can Surprise You With Property Taxes

When viewing prospective home listings, the property taxes may be outdated and lower than what you’ll pay. Once you purchase the home, the reassessed home value may mean a recalibration of property taxes, and the difference can be significant.

However, it’s not all bad news. Once you close escrow and own the home, you reap the benefit from the yearly cap on taxable value. When you consider how the real estate market continues going up in our area, it’s only a matter of time before your property taxes are lower than they would be if your property was reassessed.

Also, remember that property taxes will be rolled into your mortgage payments, making them more manageable. Once your house is paid off, you’ll begin receiving property tax bills from the county. Feel free to contact the Volusia County Property Appraiser to get an estimate of your property taxes based on the final sales price so you’re prepared..

Home Inspections May Help Lower Property Taxes

There’s not much you can do about property taxes; everyone has to pay them. And, like mortgage insurance, property taxes are a federal tax deduction. However, there is one thing you can do to make that pill go down a little easier: use a home inspection to verify the home is worth what you’re paying.

If the home inspection detects significant structural issues, you’ll be able to negotiate a better price which can lower property taxes. If the home is in perfect shape, you’ll know that the price you’re paying is worth it, which softens the property tax blow.

Contact us at Super Inspection Pros to learn more about the home inspection process or to schedule an inspection for your new home.

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