Buying property in the US / property tax

42 posts in this topic

My daughter and her husband are looking to buy a property near New York (as he works in Manhattan). There seem to be areas with surprisingly low prices (given that they´re near NYC). E. g. this one costs only $ 220000.- and that seems to be the going rate for the neighbourhood. However, property tax is $ 7774/year although on the agent´s website the monthly tax burden is given as $ 381 only. And this discrepancy can be found on all the properties I´ve found online. Is there some explanation for it? Can you maybe offset (part of) property tax against your income tax? As a rule of thumb it seems property tax is up to 5 % of the value of a property. What am I missing here? Is it just me who thinks that is insane?

Any tips on what to keep in mind when buying US property?

0

Share this post


Link to post
Share on other sites

its insane if you aren't accustomed to it.  I'm not sure what kind of explanation you're looking for - different country, different customs.

 

you can google "irs deducting property tax" to learn what's allowed. 

 

one tip would be that when the listing says the property needs "tons of work" - believe it.   The price looks nice but this description suggests it could easily turn into a total money pit.  You should always have a house inspector check a place out so you have some idea of what kind of repair costs you're facing before buying.

 

eta: it's also a short sale, which means it's one step away from foreclosure.  You can get deals this way but it's not without risk.  Hire a lawyer (you should always have a lawyer to represent you in real estate transactions but especially in non-traditional sales it is even more important)

1

Share this post


Link to post
Share on other sites

Property taxes are deductible but Trump has lowered the limit. Also one often pays school tax in these areas. If the price is too good to be true then it’s too good to be true. And real estate transactions in the Northeast require a lawyer and have many other fees. You need professional help or you will get fleeced. That’s the way it is. We have owned in California, Kansas, and NY.  NY was the worst.  NJ will be similar I suspect.  Every middle man wants a piece of the action. 

0

Share this post


Link to post
Share on other sites

And the taxes and deductions vary between federal, state, and local entities. Everyone wants some of the pie. Buyer Beware!

0

Share this post


Link to post
Share on other sites

If your are getting the tax amount from a web site be careful if it is a condo or apartment the amount shown could just be the hoa fee for monthly maintainence and the tax is on top of that. you must verify the actual fees and tax through a realtor. Get your own relator to help search. Also taxes and interest on mortgage are deductible IF you exceed standard deduction which is about 23k Now  if married filling jointly. Tax differences between states are significant this is why so many move after retirement to save cost.

0

Share this post


Link to post
Share on other sites

the monthly "payment" for the property tax is an estimate based on nothing, apparently.  Read what the website says.  The tax assessments listed should be accurate, and I'm sure you can do the math to figure out how much that would be per month.

 

note you normally pay this as part of your mortgage payment.  Then the bank pays the city.

 

you really should hire a buyer agent if you're serious about buying.  Unlike Germany you are not stuck with dealing with the seller's agent only.  You can hire your own and a good one will explain all of the details of the home buying process, they'll look for properties that match your criteria (yes they will always try to talk you into a more expensive property, just say "no" if you're genuinely not interested), arrange viewings, negotiate with the seller agent, and they may arrange inspections and other stuff too.  Can you imagine?  Maklers who actually work for their fee? :)  

 

2

Share this post


Link to post
Share on other sites

I just noticed the link and looked. If a listing says tons of work it means unless you are a contractor run. The low tax basis is shown based on sale price nit appraised value. Its not the actual tax, you need to see the assesed value to know actual tax which is the actual amount you would pay. As soon as you will buy and renovate this amount will go up to the renovated values. In a home this age it could have asbestus, lead paint, need a complete rewire etc maybe need as much as purchase price in renovations or more. 

0

Share this post


Link to post
Share on other sites

Changes in the assessment after renovations depends on the municipality.  For example I heavily renovated my house in the Boston area and it made zero difference in the assessed value.  Normally things that affect the assessment fundamentally upgrade the functionality of the house, eg increasing the square footage via an addition, converting some part of the house to add a new bathroom, and things of that nature.  Cosmetic improvements and deleading or asbestos removal do not normally affect the assessed value at all, and in fact not performing those upgrades if you know there is a problem can land you in hot water, especially if there are children living in the house.

 

a local buyer agent can explain all of it and an inspector should be able to inform you regarding renovations and expected tax implications.

 

eta:  CA is one state where property taxes are (or at least used to be) based on the sale value of the house.  In the northeast, as far as I know fairly universally, the assessed value has very little to do with the fair market value.  My house was assessed at around 250k and remained unchanged even after it sold for 420k.  Again you should always investigate the local customs as they can vary greatly.  

0

Share this post


Link to post
Share on other sites
1 hour ago, lisa13 said:

you really should hire a buyer agent if you're serious about buying

Would you have to pay them even if they can´t find you something suitable? Or can you use several and just pay the one who finds you what you finally buy? Are they regulated? Is there a way to tell who will be more trustworthy than others? Are they cooperating to create a market as liquid as possible or could you miss your dream house one block away  because it happens to be on the books of a different agent?

0

Share this post


Link to post
Share on other sites

Just to be clear:  Property taxes are ONLY deductible IF you itemize deductions.  If you do itemize, the limit for State/Local Income Tax and Property tax is $10,000, even if that amount is greater than $10,000.  The current STANDARD deduction is $12,000 if you are single, $24,000 if you are married.  I would suggest reading the instructions for Schedule A / Form 1040.  With the STANDARD deduction set at $12,000/$24,000 most folks don't have enough to itemize.  

 

S.

1

Share this post


Link to post
Share on other sites
47 minutes ago, jeba said:

Would you have to pay them even if they can´t find you something suitable? Or can you use several and just pay the one who finds you what you finally buy? Are they regulated? Is there a way to tell who will be more trustworthy than others? Are they cooperating to create a market as liquid as possible or could you miss your dream house one block away  because it happens to be on the books of a different agent?

You don’t pay them if they don’t find something. Using several doesn’t generally work.  Finding out who’s trustworthy generally means having a good lead from someone you know, or perhaps in this case the employer. Agents cooperate with each to sell things generally.

1

Share this post


Link to post
Share on other sites
40 minutes ago, Shenandoah said:

With the STANDARD deduction set at $12,000/$24,000 most folks don't have enough to itemize.  

 

S.

On the coasts most people who own have plenty enough to itemize.  in many areas of NY, such as where we have relatives, property taxes on a tiny bungalow are already 16K a year. That’s why they are hopping mad that Trump lowered the deductible amount. Their tax bills have all been increased. 

2

Share this post


Link to post
Share on other sites

BethAnnBitt,

 

Yes, property taxes are very high in some areas.  With a limit of $10,000 for state, local and property tax, a married couple would need more that $14,000 in interest (per year) in order to make itemizing worth it. 

 

S.

0

Share this post


Link to post
Share on other sites

On the coasts that’s nothing. Many people are borrowing 90-95% of the costs. That’s part of the reason so many people live paycheck to paycheck. 

0

Share this post


Link to post
Share on other sites
4 hours ago, jeba said:

Would you have to pay them even if they can´t find you something suitable? Or can you use several and just pay the one who finds you what you finally buy? Are they regulated? Is there a way to tell who will be more trustworthy than others? Are they cooperating to create a market as liquid as possible or could you miss your dream house one block away  because it happens to be on the books of a different agent?

 

All of these questions show how little you know about the US real estate business.   My tip would be for your daughter/husband (who probably know what's what) to have a conversation with you to explain how the US differs (greatly) from DL.

 

Unlike DL most property's taxes can be found on the Tax Collector's web page.  The house you're looking at can be found here using the address:

https://wipp.edmundsassoc.com/Wipp/?wippid=0260

 

And this is what comes up:

https://wipp.edmundsassoc.com/Wipp/?wippid=0260#taxPage9233

 

 

 

 

 

 

 

 

 

nj.PNG

0

Share this post


Link to post
Share on other sites

I would agree. I would move and rent until I understood the local market better.  And that’s what we did when moving to Germany.

1

Share this post


Link to post
Share on other sites

Also, unlike in Germany you generally sign an exclusive contract with your buyer’s agent for a set period of time - often 6 months. A good buyer’s agent will talk to you about your needs/wants and then do all of the looking for you. Things have been democratized with Redfin, Zillow, etc but agents generally still have more access to listings than average Joes. They can use the state’s MLS database, which is the method to list almost all properties for sale to the general public. MLS databases can also show “coming soon” listings. 
 

The agent should send you potential listings, which you will either say yes or no to visiting. Then the agent arranges the visits and accompanies you (they access properties through special keys available by swiping their realtor card). The seller and seller’s agent will almost never be present for buyer visits. In the US it is MUCH easier to schedule visits and usually a buyer will see several in one day, all organized by their agent. 
 

When the buyer decides to make an offer, their agent arranges the paperwork directly with the seller’s agent. And so it goes for any negotiations as well as some parts of the lending and titling process. This is one reason it is so important to get a good buyer’s agent - a good one will make the process way easier and a bad one can totally screw you up. 

0

Share this post


Link to post
Share on other sites

Does that mean there will be two realtors to be paid (the buyer´s and the sellers)? What kind of commission would you have to look at?

0

Share this post


Link to post
Share on other sites
3 hours ago, MollyWolly said:

Also, unlike in Germany you generally sign an exclusive contract with your buyer’s agent for a set period of time - often 6 months. A good buyer’s agent will talk to you about your needs/wants and then do all of the looking for you. Things have been democratized with Redfin, Zillow, etc but agents generally still have more access to listings than average Joes. They can use the state’s MLS database, which is the method to list almost all properties for sale to the general public. MLS databases can also show “coming soon” listings. 
 

The agent should send you potential listings, which you will either say yes or no to visiting. Then the agent arranges the visits and accompanies you (they access properties through special keys available by swiping their realtor card). The seller and seller’s agent will almost never be present for buyer visits. In the US it is MUCH easier to schedule visits and usually a buyer will see several in one day, all organized by their agent. 
 

When the buyer decides to make an offer, their agent arranges the paperwork directly with the seller’s agent. And so it goes for any negotiations as well as some parts of the lending and titling process. This is one reason it is so important to get a good buyer’s agent - a good one will make the process way easier and a bad one can totally screw you up. 

Does that mean there will be two realtors to be paid (the buyer´s and the sellers)? What kind of commission would you have to look at?

0

Share this post


Link to post
Share on other sites
6 minutes ago, jeba said:

Does that mean there will be two realtors to be paid (the buyer´s and the sellers)?

 

The realtors will split the commission unless you buy one of your realtor's own listings in which case, s/he will get it all. 

 

The sellers pays the commission which is, of course, added onto the price of the property.  When you hire a realtor as a buyer, they know they will get a commission if they work hard enough to sell you something. When my ex would get transferred and we had a day or 2 to go house hunting, our realtors knew they had a sure sale and didn't work as hard as we would have wished but then we only had a couple of days to look at properties.

0

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now