Monthly Archives: October 2011

Property taxes 101 – What to know when buying a home

They say the only certainties in life are death and taxes.  When buying a home, property taxes are definitely a factor as it can affect your loan qualification and the vastly affect the amount you can purchase. 

 Why do property taxes differ so much from area to area?80% of all property taxes go to school districts.  But taxes are higher or lower based on the town, schools and county.  Towns that have a lot of businesses, warehousing and industrial properties will usually have better taxes than areas with mostly homes.  Counties all affect the amount they charge taxes against assessments.  For example, Will and Dupage county tax properties based on one-third the assessed value.  Cook county taxes residences on at a much lesser rate, but the individual area tax rates can be higher. 

Do Tax Exemptions lower property taxes?                             Yes taxes are discounted for homeowners and seniors with exemptions and are calculated differently in each county.  Seniors over age 65 can get tax freezes and tax discounts.  Homeowners will also get tax discounts.  Exemptions are filed annually on a home at the beginning of the year or if by application.  If you are looking at a bank or government-owned property and the property has not been occupied for more than a year, chances are there is no homeowner exemption and there could be an average 10-15% deduction off.  However, lenders will often not allow this to be considered when qualifying you for a mortgage.  You can see what exemptions are for taxes on the mls or property tax records.  

Will the taxes go down when I buy the property?               Market value determines assessment.  It used to be that when you sold a home, the sale price is the market value for at least a year or two.  BUT with declining values and distressed properties, the taxing entities (towns, schools, counties, libraries, fire districts, etc.) were losing money.   Assessors are now valuing any property sale based on value of the 3 most recently sold comparable properties. Properties that have not been on the market since 2007 have likely inflated assessments based on former values.  Most assessments are not reviewed or lowered due to market conditions.  So, when you buy a property, the taxes will likely go down.  BUT BEWARE.  What goes down, must come up again.  What you paid for the house may not be as low as the assessment for taxes.  If you get a short sale and other comparable homes sell in that area for higher, that will determine the assessment.   But values will go up eventually and then so will taxes, so that is something to keep in mind when purchasing a distressed property. 

I always tell buyers if you are not comfortable with the inflated taxes, maybe you should not buy that house.  Although you will get a bonus on the equity in the home.  Keep in mind that $10,000 in purchase price is equal $50 per month in monthly mortgage payments, so a house that is $1,000 less in taxes can be about $17,000 more in purchase price.  So you need to weigh the cost against the price of taxes. 

Check the websites of the township and county assessor to learn how to calculate taxes.  There is no exact way to know what next year’s taxes can bring, because the assessor, town, schools, etc. can just change their rate. 

You can fight your taxes – but assessed value is the only argument you can appeal.  The only way you can affect the tax rate of the area is with your vote and municipal political involvement.

Credit Woes – Part III – What to Look for in a Credit Correction company?

Let’s say you want to buy something like a home or a car or have read my blog and know how bad credit is costing you money.  There are tons of credit correction companies out there.  Some are good, some are scams.  How do you tell the difference?  Do your homework.

Ask for references on companies.  Ask Realtors, Lenders, Banks.  These professionals make their bread and butter from people with good credit.  They will know the good companies to use.  Ask questions on Realtor forum sites like Trulia, Zillow, Homes.com.

Beware of the internet.  Remember, anyone and everyone can create a website and become an ecommerce business.  It is difficult to tell the difference between a reputable company and a scam.  One way to spot a scam is if they ask you for a lot of money up front.  No company deserves your money up front.  A little set up fee is fine, but not all up front. 

Once you find some reputable and referenced companies, ask the right questions to ensure they will earn their money and you will restore your credit.  Plus, don’t sign up for any term.  They should be working to get you done when done, not when a certain contract expires. 

Ask for a plan.  Any credit company should be willing to give you a minimal charge or FREE consultation on what you need to fix your credit. They should be able to have a plan and be able to tell you what they can do for you.  Simply monitoring your credit is not enough.  Can they remove the inaccuracies with the credit bureaus?  Can they advise you on how to settle or negotiate delinquent and outstanding obligations?  Can they give you a budget or a plan on what you can do to make the most impact on your credit in the little time.  Someone who says – pay your debts and we will let you know when your score improves – not good enough to get your hard-earned money.

Accountability.  If I follow your plan – how will I know it is working?  If you are paying a monthly fee, you should have someone calling you or emailing you AT LEAST once a month to ensure that they are working for you.  What have you done for me lately?   It usually takes 60 days for any changes to appear in your credit report.   Make sure they are working for this money.  If you are paying someone and they don’t make progress and tell you what they have done for you – DROP THEM!

Guarantees.  Don’t expect guarantees.  They may be able to tell you some timetables, but they can not predict completely time accuracy.  All they should be able to guarantee is that if you follow the plan and do your part and they do their part, progress should be made and your score should rise. 

Cooperation.  Be patient.  As long as they are accountable, be patient.  As always, it takes longer to undo something than to do it the first time.  And don’t forget – you are a partner in this process.  The company can correct things with your credit bureau, but you must follow the plan and make the lifestyle changes and sacrifices to get back on track.

Payment.  This will cost you money.  Most companies charge a monthly fee and maybe a reasonable start up fee.  Most I have seen are not more than $100-200.  Again, don’t lock into anything, you should be able to cancel at any time. Make sure you get all charges and promises in writing – even email is fine. 

How do I start?  You can get your credit report free 1x a year from each credit bureau at annualcreditreport.com.  Look at the accuracies and inaccuracies and then call for the free or minimum fee consultation.  Many will ask you to provide your credit report to them.

This is the third in our CREDIT series, look for parts I and II on our about How BAD credit is costing you money and What you DON’T know about your Credit can be Hurting You.

BAD Credit is costing you more than you think

 

Yes, my credit is bad.   Yes I have some delinquent accounts that I haven’t paid.  I really need to fix it….  Sound familiar?  Many people have outstanding accounts that they know about, late medical bills.  In Part III, we will discuss how you can correct, but you may be SURPRISED at HOW MUCH your bad credit is costing you every day.

 

In today’s business world, risk is involved in every transaction.  How risky are you as a customer?  Your credit score tells them.  Sometimes it doesn’t tell the whole tale or gives a false impression, but it is the equalizer among all people and is used to make decisions that can affect you in many ways and cost you money.  An MSN Money internet article summarizes the loss of bad credit at over $200,000 over a person’s lifetime. 

 

Housing.  Since housing is your biggest cost, it is costing you the most.  Rental has other implications on children’s home stability, state of mind, test scores, etc.  BUT just the dollars and cents is that rental is costing you on average 50% more than home ownership.  Rental prices are higher because they can be and are in demand. 

 

Owning also allows you to deduct mortgage interest and real estate taxes.  For some people, that is the only deductions you have, which allows you to piggyback other smaller deductions like charitable contributions, unreimbursed business expenses, etc.  This can save you thousands in taxes.

 

Interest.  And if you are able to buy a home or a car, furniture, electronics, etc. your credit score does affect the interest rate available to you.   Better credit scores will allow the bank to provide you with a lower interest rate.  Depending on what you are buying, even a .50 percent difference in interest rate could save you $50 for every $10,000 per year.  It doesn’t seem like a lot, but if you buy on credit, it adds up.   The interest rate difference can prevent you from qualifying for credit terms, forcing you to pay cash for everything and wait until you have it. 

 

Employment, Career Advancement.  Did you know that your credit score can prevent you from getting a job or even getting a promotion in your current job?  Employers look at the way you manage your money and also consideration of security.  Many human resources managers consider bankruptcies and credit scores when considering new employment or promotion of jobs that involve management of company funds.  If a candidate is in debt, sometimes they are deemed a bad risk.

 

Insurance rates for car, home, etc are also based on your credit rating.  Again, they are looking at risk.  Insurance companies are in the risk businesses.  The better your credit rating, the better the rate.  Given the cost of most insurance rates, extra charges add up. 

 

Relationships also can be strained by bad credit.  Each individual has their own credit, but as is often the case, money problems can cause fights.  And many times the higher cost of everything or preventing you from being able to afford the things you want, especially when one has the problem credit can create rifts and even sometimes break ups. 

 

For all of the above and more, credit correction is an absolute necessity.  850 is considered a perfect credit score.  And a lot of times, there are mistakes in your credit that is costing you money too.  Check out Part III of my Credit Woes blog next week to give you an idea of what to look for in credit correction.