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Wow, I feel a bit foolish.
Not many of you know my situation, which is my fault as I haven't posted my current status with regards to first time mortgage shopping. That part is coming, in the next day or so, depending on workload. For the time being, let me say I feel very foolish with regards to property taxes.
I have been looking around at new home construction in NJ from $450K to $550K and figured my property taxes would be on that price. As the property tax in the area I have isolated in are around 4.5% (NJ is killer) I was thinking I was going to be playing close to $22K per year.
I just got off the phone with the tax office for the town and was informed I was only paying the taxes on the assessed value, which is a 50% ration for the area.
Wow, that really made me feel much better considering I have much more purchasing power. However, help me understand this better. Why would I buy a home for $550K that is only assessed at $275K ?
it is just the county assessment, it means nothing when you go to sell
Property taxes are a crazy thing. I went really in depth trying to figure it out in my recent house hunt. One area I looked at asseses at 100% and the tax rate is 3.5%. Another area assesses at 47% and the tax rate is 6.4%.
For a $100,000 house, my taxes in area #1 would be $100,000 x 3.5% = $3,500. In area #2, they would be $100,000 x 47% = $47,000 x 6.4% = $3,008.
Of course, the same house that's $100,000 in area #1 might end up being $130,000 in area #2, or vice versa. It makes it REALLY hard to compare apples to apples!
Yeah, the house isn't valued at 50% in terms of its resale value. You're just not getting taxed on the entire value, if the information you received is correct.
@Autumnslight wrote:Property taxes are a crazy thing. I went really in depth trying to figure it out in my recent house hunt. One area I looked at asseses at 100% and the tax rate is 3.5%. Another area assesses at 47% and the tax rate is 6.4%.
For a $100,000 house, my taxes in area #1 would be $100,000 x 3.5% = $3,500. In area #2, they would be $100,000 x 47% = $47,000 x 6.4% = $3,008.
Of course, the same house that's $100,000 in area #1 might end up being $130,000 in area #2, or vice versa. It makes it REALLY hard to compare apples to apples!
Great explaination, thanks for the details.
How are these assesment ratios determined and by whom?
They're generally determined by county/city/town/village tax assessors. They're usually figured out based on the comparative sales in the area and the municipal budget for the coming year, but it's a very locality-specific thing, and it varies depending on the state/county/town/etc. Some areas have state-wide legislation about how property taxes are determined, some are local, etc.