Monthly Archives: February 2014

High Property Taxes? How to Change – Part 2 of 2

Real estate property taxes can definitely affect your buying power as well as your ability to buy a home and sell your home. A quick formula says $50 per month in mortgage payment equals $10,000 purchase price. So, if you pay just $1,200 more each year in property taxes, you could buy a home that costs $20,000 more.

As a seller, that $1,200 more in property taxes each year means that a buyer can afford to pay you less for the home and sometimes less buyers can qualify. This means with higher taxed properties, you will have to give them more features and more space for the same or less money to sell your home.

So, what can be done to reduce property taxes? Last week, we discussed why property taxes are so high. Addressing those same issues is how we can change or reduce our individual property tax burden.

1. EXEMPTIONS: The easiest way to ensure you are not being over taxed is to get the exemptions you are due. Each county has different exemptions – homeowner, senior (aged 65 and over, disabled people, and some veterans and different amounts for those. You can find out what exemptions you are receiving on your tax bill and also on the county assessors website or by calling or visiting your local township assessor’s office. You can find out what exemptions you are entitled to and may qualify for on the county assessor’s website or by calling or visiting your local township assessor’s office. These sources can also tell you what paperwork you need to qualify for those and apply for them.

2. PROTEST ASSESSMENTS: Tax rate made by government leaders is one reason for the high tax burden. The other part of the equation is your assessment. Especially in times when the market value of homes is changing – down in the last few years and now increasing slightly, you want to ensure you are not being over-assessed. Every 3-4 years the assessor’s office – usually a township, but sometimes county assessor, evaluates your property and compares with other area recent property sales. Each year your township will open for tax protests-usually a very small window of time 2-3 weeks. You can find out the time from your county assessor website or by calling or visiting your township assessor. You can do this yourself or you can hire someone to protest the taxes on your behalf to the county board of review. There are attorneys and other companies who take a percentage of what they save you, so it may cost you nothing or very little compared to the savings. There are forms to be completed and you must provide documentation of why you believe you are being incorrectly assessed. The burden is on you to explain and provide documentation of recent comparable sales or if there is something incorrect about how the assessor has evaluated your property. A mistake in the record in bedroom count, building or property square footage, etc. can affect your assessed value. Many people who protest their taxes are successful if they can substantiate their position. You often need to do this each 3-4 year period. You can find out your assessment on your tax bill and also on the county assessors website or by calling or visiting your local township assessor’s office.

3. DOWN WITH HOME RULE: Home Rule was a reason in some municipalities that many areas have a higher than their share tax burden. Home Rule can be overturned by public referendum in towns under 25,000 populations, which would cancel the blank check that the municipal governments receive to tax and set fees at will. All you need is to get enough signatures to have the question put on the referendum and get people out to vote. A grassroots effort with very little expense can do this

4. VOTE THEM OUT: Since property taxes are more local than anything, your elected state, county, municipal, and school board representatives all directly affect the outcome of your tax burden. You can exercise your right to vote and/or tell your leaders how you feel. Going to village, county and school board open monthly meetings required to be held each month and voicing your concerns is one way. You may even get the attention of local media to amplify your point. On the state level, you can email or call your state representative and let them know of your concerns. But the most direct point of objection is at the poles when you can vote people in place that will address concerns about taxes and vote those out who you believe have not represented the people’s wishes on this matter.

Just like the founding fathers did hundreds of years ago, you can overturn unfair taxation. It may take a little effort but the outcome with pay dividends each year and when you go to sell your home or buy a home.

Why are Property Taxes So High? Part 1 of 2

Spring is close to springing – hopefully – but as the excitement of Spring comes, the doom and gloom of taxes drags it down. Property taxes, income taxes, etc.

Despite the fact that our founding fathers rebelled against taxes from the British, ever since our government was formed the burden of the government (and the government’s spending) has been place squarely on the shoulders of property owners and taxpayers.

For some who recently received tax bills and some who will receive and pay them soon, this is a popular question. This blog will focus on the whys and next week, we will focus on how to change that, if possible.

Unfortunately, in the entire state of Illinois and in certain towns in particular, there are several reasons for high taxes.

1. SCHOOLS – Statewide, the government gives very little of the dollars collected to schools, so the burden is on the property taxes and that is a high burden. Depending on the area, between 60-80% of your taxes go to your grade school, high school and junior college.

This burden can increase on areas that have lower assessed homes get less tax dollars per home, so the district needs to increase the rate to get more tax dollars from each person. Or in some communities which have very few businesses and very little industry – they are called bedroom communities – and the burden or the tax coffers is on the homes and property owners with no one else contributing. Businesses and industry pay taxes (in cook county a lot more than homeowners) and do not send kids to school. That lowers taxes. Long and short is everyone pays more.

2. HOME RULE – Another reason for high taxes is that some towns in Illinois have “Home Rule.” Home Rule is allowed in Illinois for towns with over 25,000 population or by referendum. Many of these towns acquired this before it was apparent what could be done with it. Many south suburban towns have this authority. It allows the town to basically make the tax rate anything they want – no ceiling – no referendum for a vote. It gives the town government a blank check.

3. ASSESSMENTS – Perhaps your home is over-assessed. The home maybe overassessed due to no re-assessment when the property values dropped in the last few years. On your tax bill or on the county assessor’s website, you can see what the market value is on your home and what the assessment is.

4. EXEMPTIONS – Are you getting all of the exemptions you are entitled to? If you live in a home as an owner occupant, if you are a renter and are paying the taxes yourself as part of your lease agreement, if you are over 65, if you are over 65 and make less than a certain income, if you are a disabled veteran, disabled person, returning veteran or if you have just made a major value improvement to your home (exemption for a certain amount of time), you could be substantially reducing your property taxes with these exemptions. All counties are different with the amount and type of exemptions, but most counties at least do the homeowner and senior exemptions.

Taxes are very specific to the area. So if you are looking for a home, you need to weigh the taxes against other benefits like lower sales taxes, lower prices on homes, services provided by the town, better schools, etc.

Property taxes are easy to find. The MLS shows property taxes on each home, your Realtor can help with that. But always make sure you know the current taxes and exemptions on the home, which greatly affect the taxes. i.e. if it doesn’t have a homestead exemption it will be higher or if it does have senior exemption or other exemption and you are not qualified for that, it will be higher. You also can go on the county assessor’s website and search by address or property identification number (pin). Or you can call or go to the township or county assessor’s office and ask.

Echo Boomers Mark the Future for the Home Market

The big question many people are asking is about the future of the home market.  After the “bad years” or the bottom of the market experienced in 2008-2012, 2013 marked the up swing in pricing.  Many areas not riddled with distressed properties experienced an average of 10% price increases from 2012.  Low interest rates and increasing consumer economic confidence brought buyers into the market in 2013.  Inventory shortages drove prices up slightly and created some buyer challenges,but buyers bought homes in 2013.

2014 seems to be more of the same – so far.  Interest rates are still low and buyers are still in the market.  So, what does the future hold for the home market?  Sheer demographics can provide some of the answers.

80 million people were born in the US between 1982 and 1995.  They are called Echo Boomers or Millennials.  This is slightly larger in 4 fewer years than the 77 Billion born from 1946 to 1964 – otherwise known as the Baby Boomers.

Just as the baby boomers changed nearly every aspect of society with their large numbers at every stage in their lives, the larger masses of the echo boomers promise to make an equally big impact, including starting up the housing ladder, which has been in a stall for the past few years.

The oldest echo boomers are are 32 years old with the youngest at 19.  With many in this generation waiting until late 20’s to marry and have a family, these people are just starting to be secure in their careers and finances to buy homes.  By saving (living with parents), dual incomes and better salaries from mostly college and some graduate-level degrees, this generation has more money to spend right out of the gate.

They will buy first-time buyer and first- move up homes or larger, which allows the people with those homes to move up the home ladder to a larger home and/or in the case of the empty nesters and seniors, maybe move down to a maintenance-free home. This allows the housing market to progress.  When these buyers start their journey up the ladder, it allows everyone to continue up or down the ladder.

The next five years will bring the bulk of these buyers into the marketplace and will help prices increase and stablize.  So, the future of real estate is good, relying on the Millennials.

THE SCOOP ON HOMEOWNER’S INSURANCE

Many times my clients are surprised at the differences in homeowner’s insurance rates when they are purchasing their first home or a different home.  With the help of Louis Babalis from Primary Insurance Group in Orland Park, Illinois, this should answer some questions.

When do you need homeowner’s insurance?  If you own a home and have a mortgage, the lender will require you pay the first year’s premium up front prior to closing and then they will escrow for the following years.  But even when you don’t have a mortgage, you should have homeowner’s insurance to cover you JUST IN CASE…. You never know what can happen, and your home is usually your biggest and most important investment.

Who should you call?  I recommend calling the people who have your auto insurance first, and then contacting other companies to compare.  You can also contact an independent insurance agent, who will have access to several top carriers they can use and will be able to shop your rate for you.  This might save you some time.   Some companies are good for auto insurance, but don’t have the best rates on home.  By combining home and auto with the same company you will receive a discount.

What do you look for in an insurance company?  “A” rating, years in existence, price, claim service, low complaints are all good things to look for in a company.  Sometimes the company can be big or small, but you want to ensure they are there for you when you need them.   Ask them about their customer service for claims?  Is it 24/7?  Online?  See what you like best.  Insurance companies spend a lot of advertising money focusing on their claims service.  You need to see how the difference in price and service impacts you.  You can also check with the Department of Insurance at each state or Better Business Bureau or just search online for “X company insurance claims” and see what comes up.

Why are the rates so different?  A lot of different things make up their rates.  You impact your rate.  Your age, your credit score, prior insurance claims, value of personal items you have included for coverage,  and the amount of medical coverage, all impact the rate.  The house also impacts the rate.  The police and fire department rating, the age of the home, location,  the way the home is built (mostly the materials), and the size of the home all impact the rate.  That can impact different companies in different ways – all changing the annual premium cost.  And the companies’ losses the past year can also change the rate from the beginning and from year to year.   Not only from you if you have claims, but from your state and any where the company has claims can change their rate.

What should I ask about discounts? Different companies have different discounts.  Home and auto combined is the biggest discount, sometimes paperless billing, automatic payments, or paying the policy in full can give a discount.  A monitored home security system, or even a newer roof can also give you additional discounts.

What should I tell them to get a quote?  You will want to give them the address of the home, sales price, square footage, year built, personal content items you want insured., etc.  If you have any collectibles or expensive items such as jewelry that exceed their per item limits, you want to ask and find out.

How can I get a better rate?  Discounts, as discussed before helps, but also looking at increasing your deductible can impact the rate a lot.  When considering the deductible, you want to look at what your potential claim/loss could be and the likelihood of it and then what you could absorb without a claim (claims will increase your rate).

Value of personal items can also impact.  If there was a total loss, what would your exposure be?   These are your choice; again, you need to think about what you can absorb and what you need and how it impacts your annual rate.

Medical coverage also is important.  If you have good medical insurance, you may not need a lot for this, no need to duplicate.   But you do need to consider if someone is hurt on your property or in your home and they don’t have insurance.  Consider what that should be.

The other big difference is replacement value.  With a home loan, you need to have insurance to cover at least the loan amount, but beyond that is up to you.  Replacement value is an interesting thing.  Even if the home was completely destroyed by fire or a tornado,  the land and the foundation of the home will be intact.  Those are not usually affected.  When buying a home, you buy everything, so that will not have to be replaced, but building material and labor costs do change – sometimes up and sometimes down.  That also has to be considered.   Ask their opinion, but don’t get caught up in market value beyond the initial loan requirement.  Market value and replacement value can be different.

Also, remember, computers change everything.  If you had a claim with another agency, they will know.  If the house had a prior claim (without you ), this will not impact your rate, but they will know.  So, it is all very transparent.

So, there is a lot to consider.  Make sure when you get quotes, you decide all of this ahead of time (sometimes with the first insurance person who quotes you a price), then ensure you give the same information to all so the quotes are comparing apples with apples.   And make sure you ask all of these questions to the person giving you the quote.

There is a lot to know.  The good news is you can change anything in your insurance any time, if you rethink it or if circumstances change.  It will cost you more or give you a refund in your rate, prorated, depending on the circumstances.  So there is a do over.