Your Questions Answered
At Ashlar, I firmly b that an educated home buyer or seller is best equipped to make their own decisions. That’s why I take time out of my day each and every day to answer someone’s real estate question. And, when I think the answer can be useful to you as well, I share it here. So without further ado:
Yes. Property Tax and a home purchase can line up such that it appears that way.
Property taxes are due from property owner on January 1 of every year. However, they do not send out the payment notice until October. So for example, 2021 property taxes were due on January 1, 2021.
Now say that you buy a home in February 2021. As part of closing, they use the current owner’s property taxes owed, and let’s just say they owned that house for 40 years so it is homesteaded and maybe they have some other exemptions for widow. So their property tax on a $400,000 (now) home is $600.
Property tax when the trim notice comes out in October is as expected and either has been paid already at closing or the lender takes care of it out of Escrow.
Year flips over to 2022. 1/1/2022 is the new property tax year, and so because the home sold in 2021 property value gets reassessed at the purchase price minus some percentage (roughly 10%-20%). Homestead does not apply to the initial re-valuation after purchase but will apply to each subsequent year.
So your property tax goes up to $6,338. But if you used the previous owner’s taxes of $600 (which as I mentioned has 0 bearing on you as the new owner) you are likely to be blindsided.
So we have about 22 months there until most people would become aware of a drastic change in property taxes, though as I mentioned above if you use the property tax estimator you will know ahead of time.