This is the question I have received in the email. The Buyer checked the Property appraiser's website and is worrying about financing her purchase because the asking price is higher than the tax assessment.
It is simple. Mortgage people do not base their decision on tax assessment. They base it on Appriasal.
Tax Assessment of a property only indirectly reflects the market values. The appraisal and recent sales would probably be much closer to the asking price.
Property taxes is a slower system to reflect the change in the market, and while market can theoretically change on a dime, tax assessments here are updated once a year.
So, in a hot Daytona market of 2005-2006 the market value could be much higher than tax assessment for the same property. And when we saw the market falling, the taxes kept going up at least for yet another year
Therefore, for the purposes of familiarizing with the market, and considering that IDX does not give you the prices of sold condos, asking prices are a much better indication of the real values.
As for the tax purposes, here is the formula for determining Taxable Value:
Just Value (Market Value)
- Assessment Differential (e.g. Save Our Homes)
Assessed Value
- Exemptions (e.g. Homestead)
Taxable Value
Our property taxes, Save our Homes and Homestead in Florida will be my subject of another blog post, so that it does not become too long.
So, we know that for purchases the Taxable Value and even the Just value is not the same as Market Values. But what about the taxes for the condo that you would like to buy? What would your taxes be?
When you are checking a condo, do not look at Taxable Value, as this is not the base for calculating your taxes. I.e. looking at what Sellers paid in taxes does not tell you how much you will be paying in taxes for the same condo. If Sellers have lived in this condo for 15 year, for example, their tax because of the Assessment Differential (Save our Homes) and Homestead Exemption might be significantly less, than what you would have to pay.
Check the Just Value. Even if you would homestead your condo next year (you need to own it on the 1st of January of the year you are claiming Homestead Exemption), your savings will be calculated based on the Just Value, and you would receive $25,000 exemption and then another $25,000 minus school tax if your condo’s Just value is $75,000 or more.
For example, on a $200,000 condo you will subtract full $25,000 plus the other $25,000 minus school tax, so your total taxable value will be about $159,000 (depends on the school tax amount). Then check the millage rate (1 mil = $1 of a $1,000 value), so if your millage rate is 20.64470 like in Ormond Beach, then your annual tax bill will be: $160,000 x 20.64470 : 1,000 = $3,282.51
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