Writing an offer? Don't forget to look at the taxes!

Real Estate Agent with Realty Executives

An important part in figuring out how much you want to offer for a property is going to be your tax liability!  Many of the FHA and VA loans that are doing more than 80% of the loan are requiring buyers to front the first six months and then pay monthly into an escrow account to ensure payment on a high LTV (loan to value) payment.  taxes: Receipts on a metal spike stock photos

Taxes in California are figured with a base tax rate and then a list of assessments are added on to the base.  So the percent rate varies with your purchase price but the assessments never change.  The base tax rate in our area ranges anywhere from 1.02969% to 1.03769%.  Annual assessments totals can range from low around $500 per year to very high up to $2800 per year or more.  Each property has different assessments and its important to find out what they are.  Assessments can be Mello-Roos for infrastructure and schools, or they can be basic city assessments for things like trash pickup and parks. 

When prices go up and down, taxes fluctuate as well.  A couple of years ago when prices were climbing every year, new owners would be sent a suplemental tax bill to cover the difference of the previous assessment to the new assessment.  The assessors office is anywhere from six months to a year out.  The bill you will pay will be the old bill until the new assessment is made.  This is important to remember!  Look at the current tax bill and realize you are going to be paying the current tax liability until the new assessment comes into effect. 

In our current market what happens is the new owners will usually be paying more than what they need to be paying if the price they bought is less than the previous owner.  The overpayment will be credited to the account, but this may take up to a years time.  In years past new owners were faced with a supplemental tax bill after they moved into their new home.  Now the situation is the opposite.  New home owners are being hit with a higher bill than what they will need to pay, but the good news is that the extra payment will be credited to the bill which will eventually  be reduced to the lower amount. 

Posted by

Susan Manning

Comments (3)

Niman Singh
SimplifyEm - Fremont, CA
Property Management Software

I'm surprised I didn't see this post earlier in the Real Estate and Taxes group.

You are very right, it's extremely important to consider your tax liability when you purchase a home. Many people buy homes, anticipate paying it off, but completely forget about the tax bill associated with their property. 

BTW, I took a look at your website, I think it looks great...very professional!

May 08, 2008 12:16 PM
Susan Manning
Realty Executives - Temecula, CA
Thank you so very much!!  I have forwarded this blog to several clients who are getting ready to make an offer.  I may just forward it to my email database as a reminder to everyone.  Have a good one Niman, and thank you for the compliments!!
May 08, 2008 12:19 PM
Lisa Lambert
The Law Offices of Elisabeth A. Lambert - Fresno, CA
Esq. 1031 Exchange Expert

Great information and you explained it very well. It can be quite complicated.

May 09, 2008 06:24 AM