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.