You see a house for sale in Southern Litchfield County, a smokin’ hot price, you are pre-approved by a lender, it’s in your price range… What do I mean you can’t afford it?
In a word (actually 2 words) Property taxes. Often times smokin’ hot real estate deals are homes that have been reduced significantly, but property taxes do not reduce as the price does. Those taxes need to be considered with your monthly payments, so this can knock the house right out of your affordable ball park.
Property tax is figured by the following: town assessment of the property times the mill rate divided by 1,000 = yearly property tax.
Towns and cities in Connecticut use what they have concluded, via their property assessments, 70% of their determination of fair market value. Do not confuse their number of “fair market value” for what is now fair market value according to the current real estate market! I always cringe when I hear anyone, especially a real estate agent, “the town says it is worth $XXX,XXX”. One has nothing to do with another!
What the town is saying is, on the date we revalued the property (and not through the same process a bank appraisal is done) they determined the house to be worth $XXX,XXX. Between revaluations, their fair market value price does not fluctuate, however the real estate market sure does. And their mill rate certainly can move up or down too depending on the yearly budget votes.
This can be especially true of distressed sales, or homes that have languished on the market for a long time!
Property tax amounts are something I always check for my buyers. That way, when a smokin’ hot deal comes along with property taxes that knock it out of the ballpark for them, I let them know. I have them contact their mortgage person and discuss what the high amount will do to their bottom line… the monthly payments. It can over-tip the scales so that a house that seems affordable based on list price becomes unbearable when it comes to monthly payments. On top of the mortgage payments and property tax there is also insurance to consider, and if there are any association fees at all that has to be factored into your monthly payments.
That house you found for sale may have a smokin’ hot price, but those monthly payments including taxes could be too hot for you to handle!
Interested in a home for sale in Southern Litchfield County? You can start your home search right here. But don’t forget to check those property tax amounts!