Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I’m selling a home, and my property taxes are pretty high for my area. Should I consider lowering my asking price?
A: Property taxes are certainly a factor for sellers in areas with high rates, but whether sellers are thinking about them in determining a home’s asking price depends on the area.
“It’s definitely something they consider,” said Gary Smith of the Law Offices of Gary H. Smith in Chicago about clients in his area. Illinois has the second highest property tax rates in the U.S., according to ATTOM Data Solutions.
It’s common for him to work with clients to appeal the property taxes on a home just before it goes on the market, Mr. Smith said. That lower rate could attract more interest, he added.
— Mansion Global (@MansionGlobal) May 25, 2018
And in light of the new U.S. tax law that went into effect this year and the $10,000 cap on state and local tax deductions, people are thinking about property taxes more than ever. Emily Sachs Wong, an agent at @properties in Chicago, said there is a conversation about whether taxes could affect home prices, but she hasn’t seen anyone drop their ask because of the heavier tax burden yet.
“We’re only about half way through the year … usually it takes some hindsight to evaluate those trends and we haven’t had that yet,” she said. “It’s just the beginning of a thought.”
In New Jersey, which has the highest property taxes in the U.S., according to ATTOM, people “absolutely” factor in property taxes, according to Douglas M. Standriff, an attorney in Maywood, New Jersey.
“There are homes that sell for less than they should because the property tax assessment is not correct,” he said. “It can certainly be a factor in a home not selling.”
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If potential buyers are looking at two comparable homes, but the property tax on one of them is $5,000 more than the other, that could sway their decision, Mr. Standriff said. He does work with clients to try to reduce the assessment before a home goes on the market, but since the window to appeal is short, those sellers need to start the process early.
In California, Hillary Ryan, an agent at Pacific Union International, said taxes are not something her clients have in mind when selling their homes.
“I have not yet encountered a seller who is entertaining lowering price in response to the new tax reform,” Ms. Ryan said in an email, adding that the market for high-end property has been strong in the Napa Valley area where she is based.
Property taxes in California are based on the purchase price of the property, but there’s a cap on how much the bill can go up every year. Additionally, taxes are paid on the original assessed value of the property, so generally remain a fixed expense.
Meanwhile, in Vancouver, British Columbia, taxes, especially for non-Canadian citizens, are very high, with several new tax proposals currently under consideration. Fewer homes are going on the market in some areas, but experts said it’s too soon to tell if taxes are the reason.
“We have seen a decline [of sellers], but it’s too early to attribute the new taxes, officially speaking,” said Romana King of Zolo.com, a national real estate marketplace in Canada. “The evidence is only correlational.”
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