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A Smokin' Hot Price on a House, Why Can't I Afford to Buy It?

By
Real Estate Agent with Berkshire Hathaway HomeServices New England Properties Licensed in Connecticut

Those property taxes just took this home off your "I have to see this one list" in Southern Litchfield County.

litchfield county real estateWhen looking for a home in Southern Litchfield County you need to consider the property taxes as they will be included in your monthly payments. 

Property tax is figured by the following: town assessment of the property times the mill rate divided by 1,000 = yearly property tax.

Towns and cities in Connecticut use what they determine to be, via their property assessments, 70% of their fair market value. Do not confuse their number of "fair market value" for what is now fair market value according to the current real estate market! I always cringe when I hear anyone, especially a real estate agent, "the town says it is worth $XXX,XXX".

What the town is saying is, on the date they use as the revaluation date for the property (and not through the same process a bank appraisal is done) they determined the house to be worth $XXX,XXX. Between revaluations, their fair market value price does not fluctuate, however the real estate market sure does. And their mill rate certainly can move up or down too.

A house comes on the market at a smokin' hot price!

While housing prices are down, most property taxes have remained about the same. This is something buyers often overlook. I know it is something I look at for my buyers and ask them if they were aware of the property tax amount. It can make or break a deal as far as monthly payments are concerned.

This can be especially true of buyers who are looking at distressed sales or homes in need of work.

Pre-approvals for a mortgage do consider tax amounts. However, just because you are pre-approved for purchase price of $275,000 doesn't mean you can purchase any home listed for that amount if the taxes will push your monthly payments higher than you can afford.

I always look at the property tax amount when looking at listings for my buyers and point it out to them. It can save quite a bit of heartache later on. If I am concerned because a buyer insists on seeing the house with high property taxes, I will make a call to their mortgage banker/broker and ask if those high property taxes knock this off the list.

I had a call from an agent who was very upset about the property taxes on a listing. She had taken her buyers back a few times and they were all set to make an offer... until someone looked at the property taxes. There was a lot of wasted time and energy for those buyers and I am sure they are very upset. The house was listed at a "smokin' hot price", but for a reason! Condition! Between the mill rate and the town's tax assessment of the property, the yearly property tax knocked this one way over her buyers head.

It might be a smokin' hot price, but check those property taxes before you get your hopes up!

Search homes for sale in Southern Litchfield County.

Posted by

Andrea Swiedler, Realtor, Southern Litchfield County Real Estate

2017 President, Greater New Milford Board of Realtors

2017 Connecticut Magazine 5 Star Realtor

 

 Search homes for sale in Litchfield County, CT.

 

Coldwell Banker Residential Brokerage

Litchfield County Regional Office,375 Danbury Rd, New Milford, CT 06776

 

© Andrea Swiedler 2009 - 2017

 Always do right. This will gratify some people and astonish the rest. - Mark Twain

Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Andrea. Such a great post. You are right: you don't just buy the home, yu buy its taxes. If a property is well priced you need to take in the whole picture. Suggested.

Jun 29, 2013 11:59 PM
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Andrea

It is true there is a lot of factors in the total monthly cost of a home.  Homeowner associations, insurance, taxes, the principle and interest.

Jun 30, 2013 12:46 AM
Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

Andrea,

Buyers conveniently tend to forget all the monthly "obligations" that are required to own a house. That's one of the reasons working with a local Realtor is critical.

Rich

Jun 30, 2013 01:08 AM
Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional

Andrea...

I once had a client complain because they would not drop his taxes on appeal. My response ...." you bought a $2500,000 house for $170K. If you wanted to buy a $170,000 house for a $170K we could have done that ... I thought tat you wanted a DEAL!"

Jun 30, 2013 01:10 AM
Dick and Dixie Sells
Sells Real Estate, LLC - Trinity, FL
Realtors, Tampa Bay Florida Homes For Sale

Here we also have homestead exemptions for owner occupied residents, so if the property is not homesteaded, the higher taxes will need to be used for qualifying even though the next year they will be lower. Agents need to check lots of things on a property including HOA dues that will come into play as well for loan qualification. All homes of the same price are not equal in qualifying for a mortgage.

Jun 30, 2013 01:23 AM
Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Hi Andrea.... good points... it's not just P&I that need to be considered...there are taxes, insurance and more...

Jun 30, 2013 03:10 AM
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Sheila, thank you! It really is something people need to think about. And as others have pointed out, the insurance and association dues, if any, etc.

Tim, all true, thank you.

Rich, and the agent needs to keep this in mind for buyers. I am always looking at that.

Richard, yep, point in case for sure. If you want a deal, you will pay for it somehow.

Dick & Dixie, they are not. And different rules appy to different areas of the country for sure.

Barbara, thank you. It is a lot to consider!

Jun 30, 2013 04:32 AM
Dale Baker
Baker Energy Audits and Commercial Properties Inspections - Claremont, NH
New Hampshire Relocation Real Estate Information

Howdy and evening Andrea 

Andrea, folks sure will appreciate for taking the time point out and to explain that they really need look at how much the Property Tax will have to pay. You sure did make it mighty easy for folks to be able to understand.

Have a good one

Dale in New Hampshire

Jun 30, 2013 08:24 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Andrea it does not make sense some times on what the taxes are on a property.  I just had two different Borrowers here in Middletown with two different houses in the same price range.  One had $7,100 in taxes and the other $9,200.  A $2,000 difference in taxes can take a Borrower from being qualified in a price range to not be qualified.

Jun 30, 2013 12:14 PM
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

George, it confuses both buyers and sellers alike to be honest.

Jun 30, 2013 11:05 PM