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Property Tax Increase Disclosure - Do Sellers need to be a CPA??

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Real Estate Agent with Weichert, Realtors

The Montgomery County, Maryland County Council will vote next Tuesday on Bill 24-07.  To paraphrase, the purpose of the bill is to provide the buyer an estimate of the property taxes they will pay in the first full fiscal year of ownership.

This sounds reasonable on the surface.  But the council's suggestion as to how this be accomplished is, in my opinion, complicated and oneous.

I invite you to look at the county tax office's website and the document they have posted to help sellers calculate the new tax figure:

"Procedure for Estimating Propery Taxes to comply with bill 24-07"

Our local association of Realtors and the Maryland Home Builders suggested to the council that they make a person available in the tax office to provide these figures.  The council rejected that suggestion and instead offered a compromise of an online spreadsheet that can be used to figure out the tax.

Spreadsheet link

One should keep in mind that loan companies will still use the current tax bill on the GFE's (good faith estimates), so there will be no consistency of information.

I think the issue the Council is addressing is an important and viable one, however, I think this bill is just wrong.

 

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Jessica Horton Jessica Horton Realty
Jessica Horton - Jessica Horton & Associates - Griffin, GA
Jessica Horton: I'm not #1... You Are!
Lynda:

Great info!  Congrats on being picked up as featured post on Localism.
Nov 27, 2007 07:29 AM
Anonymous
Lynda Bloom

Hey Jessica,

Thanks for letting me know about the Localism pick up, I hadn't noticed it yet.

I hope the info I wrote is helpful to some, but it certainly isn't as entertaining and creative as your stuff!  Terrific blog!

Lynda

 

Nov 27, 2007 07:42 AM
#2
Craig W. Barrett
RE/MAX 100 - Hughesville, MD
Hughesville MD Real Estate
This looks like something the buyers may want to calculate anyways. Good information. Thanks for the post.
Nov 27, 2007 07:45 AM
Anonymous
Lynda Bloom

Thanks Craig.  I definitely think Buyers (and their agents) would want to do this, but this law puts the obligation on the seller to calculate it for the Buyer.

 

Nov 27, 2007 08:11 AM
#4
Ann Cummings
RE/MAX Shoreline - NH and Maine - Portsmouth, NH
Portsmouth NH Real Estate Preferrable Agent

Well lookie who's here?!?!?!!?!?      ;-)

Hello my friend!  Glad to see you posting here, and this is certainly controversial.  The concept is interesting, but who can predict the future?  If the tax office isn't willing to make these predictions, that should be a clue to the city leaders that this isn't a good thing to do.

Ann

 

Nov 27, 2007 01:32 PM
Anonymous
Anonymous

Hello my friend!

My first blog post...I'm so excited.  Thank you for your comments.   I do wonder if this was primarily aimed at builders who are awful about their tax estimates and that is why they have made this a seller issue?  Also, it's lenders who qualify and do GFE's based on current taxes, and this bill does nothing to address that. 

Hopefully, one day all the regulations and legislation will accurately and thoroughly address these problems. 

Lovely seeing you here!

Nov 27, 2007 02:29 PM
#6
Ann Cummings
RE/MAX Shoreline - NH and Maine - Portsmouth, NH
Portsmouth NH Real Estate Preferrable Agent

LL - congrats on your first post!!  Here's to reading many more!!

Ann

Nov 27, 2007 11:30 PM
Vicki Lloyd
The Lloyd Realty Group - San Diego, CA
(619)452-9798, Real Estate San Diego California

Hi Lynda -

In California, we have a disclosure to buyers about the sale generating a "Supplemental Tax Bill" as well as disclosures regarding special taxes and bonds, transfer taxes,  etc.  The nice thing in CA is that we have the protection of our 1978 "Proposition 13" that states the property taxes will be based on 1.0% of the purchase price of the property, and they may not increase more than 2% per year.  Of course, the "special taxes and bonds" are added after that calculation, so that the effective tax rate is often close to 2% of the property value.  The "Supplemental" tax bill is actually the pro-rated portion of the new taxes from close of escrow date to the beginning of the new tax year. 

Nov 30, 2007 03:53 AM
Anonymous
Lynda Bloom

Hi Vicki,

Thank you for your comments.  We have caps on our property taxes also and that is part of the problem here.  If an owner has been in a property for a long time then the bill increases dramatically when it is reassessed the year after sale.  However, we provide copies of the current tax bills which clearly show the credit for the cap along with the various "special" tax zones, assessments, etc. 

Does your disclosure have the figure the actual dollar amount of the Supplemental Tax Bill the buyers will receive?

Nov 30, 2007 05:14 AM
#9
Vicki Lloyd
The Lloyd Realty Group - San Diego, CA
(619)452-9798, Real Estate San Diego California

Lynda asked: Does your disclosure have the figure the actual dollar amount of the Supplemental Tax Bill the buyers will receive?

No - our disclosure just says there may be a supplemental bill.  (In the case of a falling market, it could actually go down.)  I know how to do the calculation and get within about $2, but usually give them an estimate that is padded by about $100, then I refer my clients to the tax assessor's website if they want the most accurate estimate.

 

Nov 30, 2007 08:17 AM
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