Taxes May Be Inevitable for Property Owners ...
But Tax & Assessment Surprises are NOT
“Tis impossible to be sure of anything
but Death and Taxes.”
Christopher Bullock, an English actor, and dramatist, 1716
For property owners in Will County, IL, the inevitable ... the receipt of a real estate tax bill ... has once again occurred.
Tax Bills for the County were put in the mail on Friday, May 3rd, 2019, and should, by now, be in most property owner's possession.
This event and the reaction to it on many social media venues remind me that real
estate taxes and their payment remain a very big deal to homeowners. Property taxes and property assessments affect most in many ways, big and small.
Because of that, becoming thoroughly informed and educated about property taxes ... plus property assessments, taxing bodies and taxing systems ... is important.
Property owners need to know:
- How much their taxes are
- How their real estate is assessed
- When their real estate is assessed
- How their taxes are calculated
- What their tax rates are
- Where and how they pay their taxes
- Should they have a Tax Escrow via their monthly mortgage payment, they need to verify that a copy of the tax bill was received by their Lender/Service Provider ... and paid
- When both tax installments are due
- Should they wish to protest their assessment, they need to know how to start and navigate that process
- More ...
It's also important for property owners to know: If you're thinking your property tax bill is too high, you must focus on your property assessment, as it is the assessment of your property that you must appeal ... not the tax bill.
Once you're in receipt of your actual tax bill, it's already too late to protest your Property Assessment for that levied year. (Errors of fact, however, can be corrected after you've received a tax bill.)
Any appeal filed must be conducted within 30 days of the receipt of your Assessment Notice. In Will County, when new assessments are completed they are typically mailed and published in August. They can also be found on the Will County Supervisor of Assessment's website.
Of special note for those considering a new construction home purchase now or in the future ...
It's important that you pay close attention to the topic of real estate taxes as your taxes will "evolve". What do I mean?
Most borrowers are required to establish an escrow account at the time of loan. Their escrow account includes their real estate taxes. In most cases Insurance, Mortgage Insurance, Flood Insurance, etc. payments are also included in the escrow account. As borrowers make each monthly mortgage payment, their escrow account builds.
Typically the real estate tax portion of the escrow account is based upon the last available tax bill for that property ... one which was calculated on vacant property. As a result, the first tax bill received by new construction owners is minimal.
And subsequently, the Mortgage Escrow Account set-up at the time of the Mortgage Closing has been funded each month by escrow payments based on that low vacant property tax bill. (Mortgage Originators are required to base tax escrow figures upon the most recent tax bill available. They're prohibited from collecting anything beyond that.)
But once the Assessor acknowledges the sale of that property into a completed home, the property assessment is back-dated to the date of Closing. This back-dating typically results in a much larger tax bill due during the second year of ownership.
As a result, many new construction homeowners are caught off-guard upon the receipt of this 2nd larger tax bill and find themselves short on saved tax escrow funds because of it. That often results in them scrambling for funds ... or telephone calls to their LO.
Because of that, I always stress to my new construction buyers/borrowers that it's important to:
- Gain an thorough understanding of how taxes work prior to buying any new construction home
- Make sure you know what your projected (fully-assessed) taxes will be on the home you're buying/building prior to signing a Contract
- Plan and prepare ahead for the receipt of the larger tax bill coming (typically in the 2nd year of occupancy)
While Will County Homeowners/Borrowers with escrow accounts are given notice by the County when taxes are due, it's the Mortgage Lender (or the loan servicer) that pays the tax bill installments out of the monies saved in their escrow account. This is normally a seamless process, but borrowers should verify that their tax payment was successfully made upon its due date.
Possessing a working command of the taxing and assessment processes and the terminology used regarding them definitely helps property owners in many important ways.
So to assist in that regard, I've put together a handy list of some of the most commonly heard/used tax and assessment terms below.
Property Tax and Assessment terminology:
- Property Tax - The local tax on the value of real property, land, buildings, and homes
- Tax Rate - The amount of tax due stated in terms of a percentage of the tax base within a certain tax code
- Equalization Factor - A factor that must be applied to local assessments to bring about the percentage of increase or decrease that will result in an Equalized Assessed Value equal to one-third of the Market Value of taxable property in a jurisdiction
- Equalized Assessed Value - The fair market value multiplied by the State-Certified Equalization Factor. Tax bills are calculated by multiplying the Equalized Assessed Value, minus any exemptions, by the tax rate
- Market Value - The most probably Sales Price of a property in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale, and assuming that the transaction is not affected by undue pressures
- Taxing Body & Tax District - A local governmental unit that levies a property tax. Examples: Park District, Fire Protection Districts, Municipalities, School Districts, Library Districts, etc.
- Exemption - Freedom from the property tax granted to the property in recognition or because it is taxed either directly or indirectly by other means. Example of Exemptions: Homestead, Military Veterans, Senior, Disabled, Home Improvement, Energy, Etc.
- Assess - To place a value on property for tax purposes
- Assessed Value - An Assessed Value is the dollar value assigned to a property to measure applicable taxes. Assessed valuation is the price placed on a home by the corresponding government municipality. It determines the value of a residence for tax purposes.
- Assessor - The government official responsible for establishing the value of a property for tax purposes
- Board of Review - A panel of three residents of a county, experience in real estate appraisal, who review complaints filed by individual taxpayers. The Board of Review has specific statutory responsibilities to perform during a designated period of time
- Ad Valorem Property Tax - A tax imposed on the basis of value.
- Improvements - The value of any buildings or structures existing on land, whether new or old. Improvements may also include certain commercial and industrial fixtures.
- Property Index Number - Every parcel of property is assigned a permanent index number, also referred to as PIN. Permanent index numbers are 14 or 16 digits and define the location of your property. Your PIN is located on your tax bill
- Appraisal - The act or process of developing an opinion of value; an opinion of value. An appraisal must be numerically expressed as a specific amount, as a range of numbers or as a relationship (e.g. not more than, more than, not less than, less than) to a specified amount
- Assessment Protest - An assessment appeal or "protest is the due process a taxpayer may initiate if the assessed value of his or her property cannot be agreed upon with the county assessor. It is a legal process in which a property owner contests a value or assessment either formally or informally on taxable real or personal property. For each year, there are specific statutory dates when an appeal can be made. In Will County, you have 30 calendar days from the date of the notice to file your appeal with the Will County Board of Review. The process should start with contacting your Township Assessor. Your Assessor can provide you the info and forms you need to start your appeal/protest
- 1st Installment is due June 4, 2019
- 2nd Installment is due September 4, 2019
I'll be happy to put my 40+ years of mortgage experience and
expertise hard to work on your behalf.
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