Buying or selling a home on Long Island? The recent property blows to Nassau County residents has certainly given many extra motivation to move. Though whether you are downsizing or moving out of state to lower your property taxes, here’s what you need to know about the fine print and missing print in your closing documents and your taxes.
Your Property Taxes Will Change
You can’t budget your housing costs on just what your mortgage payment will be. There will also be insurances, maintenance and utilities, and property taxes. These costs can fluctuate substantially as well. If you bought a home at the end of last year, your property taxes may already be up by close to 60%. You’ve got to leave room in your budget for these increases.
Even without higher tax rates, your property will be assessed based on any higher sales prices. The previous tax bill may have been based on a value from 10 years ago when it was worth half as much.
The previous owner could have also had a variety of property tax exemptions which made the taxes artificially low. You may not be eligible for those exemptions.
Prorated Property Taxes & Escrow
At the real estate closing the attorney or title company will collect prorated taxes to cover the tax bill. This can add a lot of money to the amount you need to close on your transaction, or take a lot out of what you thought you were going to pocket. However, this doesn’t mean that’s the end of that bill. The escrow agent can come back and ask for more money if the real bill is higher than estimated. That is probably happening to a great deal of Nassau homeowners right now. Don’t be surprised if you get this notice in your mailbox.
One very important thing to remember here is to always demand proof that your mortgage lender and escrow agent has paid your property taxes each year. Unfortunately, in the past some have collected the money, not paid the taxes and owners have wound up in foreclosure.
The Closing Disclosure & Settlement Statement
These documents can change names over time, though at the time of settlement you should receive a final accounting of money collected and disbursed. Be sure ALL charges are there. Otherwise you could end up paying a lot more in income taxes than you should.
Negotiating a Lower Sales Price
Higher sales prices trigger higher tax bills. In many cases it may be wiser to negotiate a lower price, and offset that with other terms in order to minimize both property and income taxes.
It should also go without saying that you should be challenging your property tax bill and assessment each year to avoid overpaying.