This happened to me. I wasn’t happy.
When I bought my first home in 1998 for $92,000, I was told by the real estate agent, the home owner and the mortgage company that my annual property taxes on my home would be $700. That was what the lady who sold me the house was paying. Made sense to me. I mean, I was buying the same house she was paying $700 a year on. Of course I would pay $700 a year.
No. I would not.
I would get a very unfortunate letter from the City of Detroit, two months after I moved in, as a matter of fact. “You’re new annual property taxes are $2,300.”
$2,300? No. Yes. NO! YES! DANG…
The problem is that when you buy a home, your new taxes will be based on the sales price. It’s common sense if you think about it. The lady I bought the house from probably paid less than 30k for it 25 years before I bought it. Her taxes were based on that price, plus whatever the legally allowable annual raises in taxes were.
Once the city/county assessors office got the paperwork that I had paid 92k for the house, the taxable value was adjusted and my taxes nearly quadrupled. Like I said, it was common sense for this to happen. I just wish someone would have let me know about it. The seller, the selling real estate agent, my real estate agent, all left out this little fact when talking to me about my purchase.
That brings me to the point of this post. Don’t rely on the current taxes on a house to set your budget. Know your taxes before you buy and you’ll be all set.
How do you do this? Good question.
If you live in Michigan, like I do, you would go to the State of Michigan’s Property Tax estimator and input your taxable value. Your taxable value is half of the value of the home. If you pay 200k for a house, you can pretty much estimate that your taxable value will be 100k. So based on Michigan’s website, the estimated property tax of a 200k home in Detroit is $6,819 per year for a primary residence and $8,620 for a second home. Here are the results below:
I recommend going to Google or Bing and finding your state’s property tax estimator. Try searching for “STATE estimated property taxes” – so for Michigan it would be “Michigan estimated property taxes.” For California it would be “California estimated property taxes.” If that doesn’t get you any results, try to search for a more specific query such as “Los Angeles County estimated property tax” or “Los Angeles County property tax estimator.” Keep trying, you’ll find it eventually.
Which is the important thing. Finding the correct property taxes you’ll be paying when you move into your new home is important. If all else fails, call your local assessor’s office (could be county or city depending on where you live) and ask what your taxes will be based on the value you’re buying your home for.
Like I said, knowing is the important thing. Don’t get budget shock when you are saddled with a bill three or four times what you thought it was going to be when you bought your home. It happened to me. Don’t let it happen to you. Luckily, my house was only a 92k house. What if it had been a 500k house and I was hit with a big 6 or 7 thousand more than I thought.
That would be ugly.
Don’t settle for ugly. Know your property taxes when you buy a home. Your wallet will love you for it!