Real estate agents throughout Florida are cautiously embracing a proposed plan to eliminate all property taxes on primary residences, at the same time limiting the amount of tax local governments could collect.
The controversial new plan, sparked by soaring Florida mortgage, insurance and local tax costs hampering the real estate market, was unveiled by the Florida House earlier this week, the Sarasota Herald Tribune reports.
“For Realtors, and people who market the state, the lack of a state income tax is a marketing tool, no question,” opined spokesman Trey Price of the Florida Association of Realtors.
“If the House proposal were passed, and there were no property tax, that would be a very strong marketing tool, as well.”
House leaders propose a sweeping plan that would jack up the state’s sales tax rate to the highest in the nation, in exchange for reduced or no real estate taxes. They feel that reducing property taxes would ease the burden homeowners already feel from soaring home mortgage loan costs.
In most areas of the Sunshine State, the sales tax would be pushed to 8.5 percent. By comparison, the California state tax on consumer purchases is now the highest in the U.S., at 7.25 percent.
House lawmakers estimate the change would generate nearly $8 billion in new Florida sales tax in the first year the measure was in effect. At the same time, residents and taxpayers would save almost $6 billion.
It sounds too good to be true, and it may be. Though there’s no escaping the fact that the average homeowner - whose property is protected by Save Our Homes legislation - would save nearly $2,300 annually.
Although the concept of halting the escalations in mill rates that have taken a toll on homeowners since 2002 isn’t new - Gov. Charlie Crist revealed his own plan a few weeks ago - the plan was both surprising and dramatic.
But not to Realtors. House leaders approached the Florida Association of Realtors a few weeks ago about the concept. Price said the group is “very intrigued.”
Other prominent Realtors, however, said they aren’t ready to endorse the House concept.
“It’s short-term thinking vs. long-term,” said Budge Huskey, president and chief operating officer of Coldwell Banker Residential Real Estate, among the largest groups of real estate agents in Southwest Florida.
“There’s no question that if you announce a rollback in taxes, it’ll spark additional investment and purchases,” Huskey said.
“On the other side of the table, sometimes when projections are made on how much money could be raised, you can’t always rely on accuracy. Eventually, it becomes a quality of life issue.”
Local Realtors agreed that property taxes are among several factors having the most severe impact on the state’s languishing housing market, which is not picking up steam in 2007 even as home loan rates remain low.
“We recognize something needs to be done about both taxes and homeowners insurance, because they are dramatically affecting how people look at home ownership,” said Joe Hembree of the Sarasota Association of Realtors.
“That said, sometimes things that look good on the surface often have unforeseen complications.”
“The fact that the Florida State Legislature is looking to do something is a great thing,” said May Aston of Manatee Association of Realtors. “We all want something to happen with runaway taxes, but it has to be the right thing.”
Aston said the Manatee Realtors, like their counterparts in Sarasota and throughout the state, intend to study the issue further before deciding whether to back the House proposal.
Will this alleviate any of the strain faced by would-be mortgage loan applicants in Florida? Is it just a quick fix or potentially a solid, long-lasting solution? It will be interesting to watch.
SOURCE: Sarasota Herald-Tribune
Sorry, Wisconsin mortgage holders or potential applicants: the cost of owning a home may soon increase.
Governor Doyle proposed as much as a 4 percent increase to property taxes in his State Budget address Tuesday night.
If you’re out looking to buy on the market and this increase is passed, home mortgage brokers and Realtors say you may have to look at purchasing a cheaper home.
President of Security Realty in Wausau Glen Witter says: “It’s going to affect the amount of money they have available to buy a home on a monthly basis and it could affect the value of a home that they can afford by as much as $2,000.”
For home buyer LeeAnn Kitchell, this property tax increase affects what she’ll buy.
“It does affect our monthly payment, my families budget is definitely affected by what we pay in property taxes.”
But would this limit LeeAnn’s family on where they plan on settling?
“You tend to look at different areas, around Wausau, there are different ranges of property taxes and for my family’s budget, it definitely affects where we look for decent property tax rates that won’t affect our monthly payment too much.”
The increase would not only challenge buyers and Realtors, but the entire community.
According to Witter: “Any increase in taxes in any municipality, in any area, affects the ability of people to buy a home, and home sales could slow.”
While some areas in the economy could slow, some home buyers understand the rate hikes; they believe it’s important to fulfill the needs in a community, even if it adds to Wisconsin housing market costs.
Kitchell says: “Each community has to look at what their needs are and hopefully their leaders are being fiscally responsible and only good use that rate if they absolutely feels necessary or if there’s a lot of growth if they need to add services such as Kronenwetter, Westin, Mosinee.”
Yesterday’s edition of the Detroit News tells the story of Ed Roland, 88, who recently joined Michigan’s growing ranks of desperate home sellers.
He had already moved in with his daughter in Florida and watched helplessly as his Canton Township home languished on the market for nine months.
“It’s vacant and we’re paying property taxes and paying lawn service,” said his daughter Judy, from Naples, Fla. “We just thought, ‘Don’t mess with it: We’ll just accept whatever (the buyer asks).’”
And what, exactly, did the buyer ask?
Pay the rest of this year’s taxes - about $2,400 - on the property.
If the market were healthy, the seller could tell such a buyer to get lost. But some desperate sellers, facing seriously tough competition in a market with falling home prices, are now offering property tax credits to sweeten the deal for interested buyers.
It’s unclear how common the practice has become, but buyers emboldened by the housing market glut and low Michigan mortgage costs are certainly not ashamed to ask for it.
Such tax credits can bring significant relief to new home owners, given the property tax “pop-up” that they will face. This year, a new homeowner in Metro Detroit will pay 22-31 percent more in taxes than the prior owner.
In some cases, that amounts to thousands of dollars a year.
That’s because a 1994 Michigan law, Proposal A, caps annual property tax increases, allowing it to keep pace with inflation but not appreciation - until the house is sold, of course.
Then the cap is removed, and the taxable value on a home jumps to the value of the assessment, even if home is bought at a discounted price.
Gary DeGrandchamp, a Livonia, Mich., real estate agent, uses this argument to convince his sellers to offer tax credits in this buyer’s market, at least for the first year.
“It’s not the buyer’s fault the taxes are so high,” he said.
But that is tough for sellers to swallow, and the landscape may yet improve even more for buyers looking to enter the tepid Michigan housing market. Last month, state representatives introduced several bills that would soften the tax “pop-up” to new homeowners.
One calls for phasing in the assessment hike over three years after the sale. Another calls for city assessors to use the sale price as the “true cash value” of the home, as opposed to the estimated value that had been used. In some cases that could eliminate the tax jump altogether.
In a climate where mortgage loan rates are advantageous to the buyers, and the inventory for sale has turned in their favor as well, it will be very interesting to watch how these pieces of legislation progress.
SOURCE: Detroit News
Doug Miller of KHOU TV has the following to say about a certain issue within the Texas housing market:
With a booming housing market comes booming prices and booming property taxes. For a lot of the people buying houses, however, there’s also a booming loophole.
Texans have to pay the government property taxes based on the value of our homes.
But they do not have to tell the government how much they paid for these homes at the outset of the Texas mortgage process. Some of the people who run the tax offices think that needs to change.
“If you want to get the property tax system straight, then use the value that everybody knows, which is the value of the home sale,” Paul Bettencourt, Harris County Tax Assessor-Collector, said.
A handful home buyers volunteer their sale prices, but for those who don’t, appraisers estimate. Often, they underestimate.
In a way, appraisers say, the current system discriminates against middle-income homeowners because in thise neighborhood houses sell fairly often. Properties are similar, with the prices listed in the Multiple Listing Service and even in the Sunday paper.
Therefore, it’s fairly easy for an appraiser to estimate the sale price of a home.
However, in high-income neighborhoods such as River Oaks, it’s a different story. These are not suburban tract houses. Property appraisers say it is almost impossible for them to estimate the value and the sales price of a unique mansion.
“If we’ve got it appraised for $2.5 million and it sold for $7 million, then the owner of that property is getting a huge break in comparison to the owner of a $200,000 house or a $50,000 house that we’ve tagged right on the money, because it’s easy for us to come up with what that stuff is selling for,” Jim Robinson, Harris County Appraisal District.
For years, taxing authorities have wanted state lawmakers to require price disclosure for all real estate transactions. They will try again in the legislature this year.
“I’m optimistic that we’ll get that worked out this time. I think it’ll be part of the recommendations that the governor’s property tax appraisal reform commission comes out with,” said State Sen. Tommy Williams, R - The Woodlands.
But the idea faces powerful opposition.
Commercial property owners argue that the value of, say, a skyscraper isn’t in its sales price, but in the money it generates from its tenants.
Realtors don’t like this idea, either.
“It’s my opinion that the taxing authorities get a deep enough cut into us in every different aspect of our lives. And it is one of the few things that we still have that is private, and that is the transaction between a buyer and a seller,” said realtor Carlos Garcia II.
But if some of the people who tax property have their way, they’ll know what individuals paid after the “For Sale” signs come down and home mortgage loans have been approved.
The Oakland County Press has an interesting editorial today involving a recently proposed property tax measure. This may be of interest to those who have been struggling to make the Michigan mortgage payments, or are considering taking out a new home loan. See below:
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Some Oakland County residents are going to see in their property taxes for 2007 why some aspects of what has become known as Proposal A were not well thought out.
Passed as a tax limitation amendment to the state constitution in 1994, Proposal A limits property tax increases to the rate of inflation or 5 percent, whichever is less, regardless of increases in home values.
The legislation established both a taxable value and an assessment value on a home. The assessed value is half of true cash value, but the taxable value is what is used to determine a homeowner’s taxes.
Over time, for people in Oakland County who have remained in their homes, the gap between the taxable value and assessed value has widened. Because of that, those people will likely see an inflationary increase in property taxes even if their assessed values have gone down.
A home’s assessed value would have to fall below the taxable value for property taxes to decline.
One of the problems with Proposal A is that when it was passed, legislators did not address the situation of a declining Michigan housing market.
So now, while some residents face lower assessments on their homes, the decrease is applied to only the true cash value of the house, not the taxable value, which could be considerably less than the true cash value, but is the figure used to determine a person’s tax liability.
When notices of assessments are sent out to homeowners in February, the county Equalization Division plans to include a pamphlet on Proposal A. Let’s hope it will help explain the situation, but unfortunately, it won’t change it for those currently holding mortgage loans on properties that are now declining in value.
At first, it doesn’t seem fair that while property values in some areas of the county may be dropping, taxes still may go up for those homeowners.
While convoluted and complex, however, Proposal A actually has done what it was meant to do - keep real estate taxes down for people who have lived in their homes for a long time and wish to remain there. Before Proposal A, property values were skyrocketing, and thus taxes were also rapidly increasing.
Many people, particularly those on fixed incomes such as senior citizens, were being forced to move, or consider a reverse mortgage, because they couldn’t afford to pay their taxes.
If you do the math, those who pay higher taxes this year despite a lower overall assessment will most likely still come out ahead if they’ve lived in their home for any length of time.
Meanwhile, be thankful and realize once the economy turns around and assessments again rise, Proposal A should help keep the property tax down and allow residents on fixed incomes to stay in their homes.
As borrowers consider potential mortgage costs, they often leave out the issue of property taxes.
Those in the Orlando housing market probably won’t be overlooking this concern in the near future, however. Florida’s property tax system faces a crisis due to rising levies and local government spending that exceeds the taxpayers’ ability to pay, a new report released by Florida TaxWatch finds.
Dominic M. Calabro, president and CEO of the nonprofit, nonpartisan government watchdog group, notes that his organization has seen a big increase in the volume of calls and e-mails from upset taxpayers, who believe the property tax system is “unfair and unaffordable.”
The report partially blames the state’s Save Our Homes amendment to the state constitution. Since it took effect in 1995, it has limited annual increases in homesteaded property to 3 percent or the increase in inflation, whichever is less, Florida TaxWatch says. As a result, Florida mortgage owners are faced with increased bills.
The report says that while holding down taxes for many homeowners, the amendment has brought on myriad problems.
It has shifted billions of dollars in taxes from homesteaded taxpayers to non-homesteaded businesses and those with second properties; created inequities in tax treatment; increased housing costs for renters and new home buyers‘ and restricted the financial ability of some people to move to a different home.
The report urges the repeal of a 3 percent cap on homesteaded property owners’ annual tax bills while maintaining taxpayers’ current savings, a cap on local property taxes and revenues, and a fairer system for assessing a property’s value.
Until that occurs, it could be difficult to attract mortgage applicants to an area where the costs are so steep.
Most Lyon County, Nev., property owners can expect to see an increase in their assessed valuations of land (real property) for the upcoming 2007-08 tax roll to be published in December.
However, those significantly increased assessed valuations won’t mean owners’ property taxes will go up as much as it might appear, due to the 2005 Nevada Legislature-approved AB 489 (tax abatement bill), which placed a cap on the annual tax increase for property owners.
For owners of owner-occupied residential property, the cap is set at 3 percent annually (from one year to next), while there is an 8 percent cap on other properties, including commercial real estate and rental property, according to the Reno Gazette-Journal.
Usually the Assessor’s office reassesses property every fifth year, with the county divided into five geographical areas (Mason Valley this year), and it uses what it calls factoring to represent assessed valuation increases in other areas.
By statute, Nevada Assessors must submit previous year sales of land for the State Division of Assessment Standards to evaluate the various areas within each county, to determine where assessed values are in relation to market prices.
The 2005 sales were submitted in April for analysis, the Lyon Assessor’s Office reported, but only returned by the state last month.
The market figures studied for 2005, though, show the rapid growth of the Nevada housing market, not the downturn in real estate seen this year in volume of sales. Since the 2005 values are used for the assessed value figures property owners will soon receive in notices with a large bump in values represented in most.
Assessor Mike Glass stressed that current vacant land sales are used to determine assessed valuations used by an appraiser and those record-breaking 2005 sales show they are out of the accepted ratio of tolerances used set by state law in some cases.
“We always play catch-up,” said Glass of comparisons of market values based on sales and assessed value, since prior years are used.
And now due to the AB 489 law, tax bills won’t reflect the huge increases (in tax charge) that might have been seen by some properties. The law ended the direct correlation between assessed valuation (defined as 35 percent of the total appraised value) and taxes, and that gap will only widen if an assessment value continues to rise.
As Nevada mortgage costs continue to soar with each passing year, property tax bills are of increasing concern to residents. Numerous areas of the county showed market spikes that threw the Assessor’s values way out of prescribed tolerances and must have value adjustments made for 2007-08, either by re-evaluation or factoring of land values.
When you’re wondering about qualifying for a mortgage, your first thought is obviously whether you can make the monthly payments - and what those payments even amount to.
According to the Denver Post, getting an accurate mortgage calculation isn’t as easy as some people try to make it.
For consumers using an online mortgage calculator to see what they might owe on a new home loan deal, the problem with your payment numbers comes out in the form of property taxes and homeowner’s insurance, which usually don’t get factored in, but which can add a hefty chunk to the monthly payment.
In many cases, property taxes are calculated using a mill rate, which means you are taxed a certain amount per thousand dollars of assessed value. If you owe a mill rate of 20 on a $300,000 home, that’s $6,000 a year - or a whopping $500 a month that the mortgage calculator didn’t tell you about.
Be sure, when using a mortgage calculator, that you factor in the costs of first and second mortgages, plus taxes and hazard insurance, resulting in a more realistic idea of the bottom-line cost.
Also, be sure if you are taking out an interest-only mortgage or an adjustable-rate mortgage, that your mortgage calculator shows the size of payments a consumer would make down the line, not only right now.
