[Venerye]

I heard this story over the weekend and cannot find out whether it's legitimate or not. Sitting in on a "Mortgage Free!" workshop one of the participants related how he pays less on his property taxes since he paid the realtor's fee separately.

To be more specific, here's an example. A parcel of land is listed for $10,000 of which $1000 is actually paying the realtor's fees, not paying for the property. But the government taxes the full $10,000 as the value of the parcel. If paying the realtor separately the parcel is instead valued at $9000 thus lessening the property tax.

The guy telling the story mentioned that he had no idea whether this is legal or not, but he managed to do it himself. I imagine it's probably not. Answers in simplistic language please: too much legalese makes my head hurt.

[paoniapbud]

The short and quick of it is that this "expert" is full of shit. Property taxes are based upon the assessed fair market value of the property which has nothing to do with the sales price. Some states may differ in how they calculate the assed value but most are fairly straight-forward.

Tax stamps, recording fees, etc. may have to do with the sales prices as a nominal and small percentage, however.

So many scammers out there...

[Venerye]

Well, actually this was just a guy sitting in the audience not the guy giving the talk. So he wasn't any sort of "expert;" I guess he is fooling himself into thinking he pays less taxes...

But thanks for the clarification.

[SILENTTODD]

Sounds like "You Can Be A Millionaire And Pay No Taxes"!

[Ancien_Opus]

It is the value of the property that determines the property tax. Dependent upon how that value was established then what was said could have a minor effect upon the tax. Establishing property values is
not an exact science so many factors are in play.

One certain way to lower your tax is to stay on top of what the market is doing. If the housing bubble burst, markets cool, then you'll need to protest your inflated tax rate with your local government. Waiting for the government to make this adjustment will take time. Most government use fair market appraisel software that can lag by a year or more on what the market is doing.

[Pops]

Actually, in CA anyway prop tax is based on the sale price after the Tax Revolt back when.

But CA has a rule for everything and needs the money; the papers are about 3 in. thick at signing. I’m not sure it would fly…


The other thing to worry about is having enough cash to put down - remember you can't borrow the commission with the mortgage if the bank doesn't have the collateral.

The minimum down used to be 20% to avoid paying PMI (private mortgage insurance) every month, which would be a big mistake cause it really costs.

I’m no math guy so correct me if I’m wrong.

100,000 house – 20% down = $20,000 cash to avoid PMI
94,000 house – 20% down = $18,800 cash to avoid PMI PLUS $6000 commission = $24,800 cash at closing

Your prop tax is 1% typically so you save $60/yr for every 100k of value.


Of course if you took that same 5k and put it down on the mortgage you would save $5,000 x 6% (or whatever your rate is) = $300/yr/100k for the life of the loan.

But then you wouldn’t be able to say yyou were getting away with something.

Silly monkeys.

[Venerye]

$this->bbcode_second_pass_quote('', 'Y')our prop tax is 1% typically so you save $60/yr for every 100k of value.
Of course if you took that same 5k and put it down on the mortgage you would save $5,000 x 6% (or whatever your rate is) = $300/yr/100k for the life of the loan.

[Ludi]

In my part of Texas property taxes are very high unless you have Agricultural Appraisal status on your land. Which I am trying to get but it isn't easy if you don't want to overstock and ruin your land.

[Kingcoal]

I think you are confusing a property tax for a sales tax. Sales taxes are a tax on the sale of something. Property taxes are assessed and are due periodically, kind of like a rent payment. Sales taxes are paid once, when the money changes hands. I can see how you can reduce the sale amount and reduce the sales tax. Most States have a tax on the sale of realestate.

[Pops]

$this->bbcode_second_pass_quote('Venerye', '
')Ok, but if you're paying cash for the property (no mortgage involved) then paying the realtor separately might put you slightly ahead? This is not something I plan on doing myself, just curious really.

[vision-master]

$this->bbcode_second_pass_quote('', 'S')ounds like "You Can Be A Millionaire And Pay No Taxes"!

[jimmyz]

Just saw the new proposed taxes up 110% on my house from last year, That is just the parish i don't even live in the city limits. pork pork please.

[jbrovont]

Here's how to get them down:

1) Put your house on the market at whatever they're saying it's worth (remember if it's the SEV on your tax slip, they think it's worth 2x that)
2) List with a major real estate firm
3) If you get an offer at your ask price, you're done. Refuse the offer and pay the tax
4) If after 90 days, you have no offer, lower the price 10% and relist for 90 days
5) Rinse, repeat

Whatever the 90 day offer is, that's the real value they can tax your house at. You may (probably) really make a real estate agent angry, but hey, too bad.

Refuse the offer, and present said paperwork to your local government office and tell them that's all you're going to pay tax on. If they fight you, sue them for past collected taxes which were assessed incorrectly.

[oilluber]

$this->bbcode_second_pass_quote('jbrovont', 'H')ere's how to get them down:

1) Put your house on the market at whatever they're saying it's worth (remember if it's the SEV on your tax slip, they think it's worth 2x that)
2) List with a major real estate firm
3) If you get an offer at your ask price, you're done. Refuse the offer and pay the tax
4) If after 90 days, you have no offer, lower the price 10% and relist for 90 days
5) Rinse, repeat

Whatever the 90 day offer is, that's the real value they can tax your house at. You may (probably) really make a real estate agent angry, but hey, too bad.

Refuse the offer, and present said paperwork to your local government office and tell them that's all you're going to pay tax on. If they fight you, sue them for past collected taxes which were assessed incorrectly.

[jimmyz]

sounds all and good but there is only 15 days to appeal. also tax rate doesn't change again for another 4 years.

[americandream]

There will be a clause in the rating legislation enabling the local authority to use the valuation it is and rejecting the variable valuation you propose to use. They will have taken steps to ensure that their method prevails in litigation.

[joeltrout]

Los Angeles County actually did an automatic re-assement for all housing and my property tax actually went down 10%.

I was quite thrilled but that means LA County just lost a butt-load of tax revenue. $1,000 less just from my house alone.

joeltrout

[Turlox]

I am a residential appraiser with a County in Arizona, would prefer not to say.

At least for Arizona, 2008 values are not able to be modified and based on the faulty inflationary values from 2006 . Even the 2009 values are set in stone and there is no legal recourse other than taking us to tax court and that is a non starter. Fees outweigh benefits. What is really going to piss off taxpayers is next year.

All values are based on sales not listings so until the crap works its way out of the system the values will not correct accurately nor will they do so in a timely matter. 18 months prior to your tax bill is essentially the date at which your values are set based on market conditions at that time.

I expect pitch forks next year at the office. We only set value usually the Board of Supervisors of a given county are the ones who actually set the tax rates. We have the lowest tax rates in the State and most of the owners who have been calling to voice their concerns are second home owners.

As I have told people on the phone "It's not my fault, I told my supervisors 4 years ago we were in deep shit, but did they listen to me? NO"

Do not expect a solution and do not expect a change. I expect a financial collapse or a revolt of one sort or another before this gets straightened out.

[jbrovont]

You can call it "offloading" or "unfair" or whatever you want. Personally I view property tax as the worst thing going in most of the United States. It basically translates into you never really "owning" property, and a method to guarantee a person will never truely be free of debt.

Cowing down and paying an inflated value isn't patriotic. It's just cowing down and accepting extortion. So do what you like.

$this->bbcode_second_pass_quote('oilluber', '
')your just off loading taxes on your neighbour.
Anyways , most homes going down in value, so they will
re work the formula so they can collect more as the value of
the house goes down.
The state needs $$ right now, property tax is the governments
best thing going.
If you don't pay, they kick you out of your house , sell your house,
and they get paid.

[kpeavey]

Mine have tripled since I bought the place, almost $400 a year now. I can't really complain, even though a years taxes now exceeds my mortgage payment.