How to use property taxes to determine the price you should pay for real estate!

Whether it's a new home or an investment property, there are some tools you can use involving property taxes. First, most people ask "what ARE the taxes?"

The better question is "what WILL the taxes be?"

Second, ask "when will there be a re-assessment?"

What will the taxes be can be estimated if you calculate the price you are willing to pay times the current millage rate. If your proposed price will be $1 million, and the millage or tax rate equates to 2.5%, your tax bill will be $25,000 - approximately. Millage rates change too, but the current rate should be close when you estimate the possibilities.. You may qualify for certain deductions in the law, but say $25,000 is the worst case.

Can you easily afford that amount? If you have no income from the property, will you be able to pay at least $25,000 each time a tax bill is mailed ot you? If the answer is yes, then go looking for all the properties in the price range of $1 million.

If the answer is no, then modify the price range you can afford - without pressure. If you intend to borrow to buy the property, and if the lender will escrow tax payments monthly, then take that $25,000 number and divide by twelve. And ask yourself if that payment obligation each month will be easy to meet.

Next, find out when re-assessments are conducted. A call to the local property tax assessor's office will provide an answer. Some jurisdictions may re-assess when your deed is recorded. Others may assess once each year. And, still others may have interim schedules, like every other year or every fourth year.If the jurisdiction in which you want to buy conducts re-assessments say once each year, and the date is fixed in the governing laws, then time the closing on your property to well after the assessment date.

In Florida, the annual date of re-assessment is every year on January 1st. Government appraisers gather data for a few months after January 1st, which may be probative of value on the assessment date. If you record a deed after, say mid-April, most likely you won't be re-assessed until the following calendar year. Under certain market conditions, that means you may initially save a year's worth of tax increases - if the price at which you buy is higher than the existing assessed value on the property.

Keep in mind that assessments are retroactive, so the current price of the property you buy typically won't match the older, out of date valuation expressed in the assessment.You should not use assessments to determine your price. For price comparisons, you should use current market sales.

But, you should use the assessments, and the system, to decide what you can afford. While you're on the phone with the local property tax assessor's office, ask them what parts of the county have properties for sale in the price range of interest to you. Those insights will save time, for you can go right to the communities and neighborhood or regions you can afford, and you'll find a choice of properties in your price range.

And finally, do have two or three choices of properties you might like to own. Select one at the lowest end of the price range. You can always paint, or landscape, or do cosmetic things to improve the style of the property you buy. The savings in property taxes, because you've purchased at the low end of the price range you can afford, will enable you to make the most of your property.

Do you want to lower your property taxes? Ad valorem taxes are based upon valuation methods, modified by state laws and regulations. CPS knows due process procedures and value applications should be applied to your real and tangible taxes. If you have a question, or need professional services, contact CPS at 1-305-372-9200.