I am not a homeowner right now for many reasons. Here’s another reason to add to the list: sky-high property tax. Yes, I pay some property tax now, hidden within my rent bill. Landlords pass the cost of taxes onto tenants. Because of the high cost of buying and owning a home, finding money for property tax is something beyond my reach in 2005.
First-time home buyers are especially running into trouble as wages adjusted for inflation haven’t kept pace with real estate prices… And as real estate prices rise, so do property taxes as a percentage of the assessed value of the house. In some cases, that percentage is going up as well.
This isn’t necessarily a bad thing in general. People who live in an area should pay for the upkeep of schools and services (regardless of whether they are directly affected). The locality has the respobsibility of making sure that money is used wisely.
As property taxes are based on the assessed value of your house, as long as you’re not selling, it’s beneficial to challenge your latest assessment. If you can lower the assessed value, you can pay less property tax.
Appraisals for sale of the house generate another set of problems. In some cases, there are conflicts of interest between appraisers and real estate agents. With a high appraisal, if the house sells, the real estate agent gets a better commission.
As noted in the Miami Herald, it’s also important for buyers to challenge appraisals they believe are too high. If the purchase is finances, the premium paid for an overassessed house can quickly add up to a large amount of wasted money.
It is also speculated that overappraisals have helped fuel the boom or bubble (or “froth” according to Alan Greenspan).
The MSN article, Taxes Soar Along With Home Prices, also includes a handy chart showing the average property tax rate in each state. You can quickly compare what you pay to the percentage others are charged. The averages won’t tell the whole story; any one state could see a wide variation in property tax.