Navigating Property Tax Challenges for New Homebuyers: Understanding and Planning for Potential Increases

New homeowners, especially those purchasing newly built homes, often face unexpected financial challenges, with property taxes being a major concern. A 2023 survey from Real Estate Witch revealed that almost 75% of recent homebuyers expressed regrets about their purchase, with property taxes surprising 33% of new owners.

Factors Contributing to Property Tax Surprises

Property taxes for new builds can change significantly after purchase, as initial rates are often based on estimates. This can be jarring for homeowners who may have already stretched their budgets to afford a home in the current market. Newly built homes now comprise 30% of the current market, up from the typical 10% to 20%, according to a recent report by the National Association of Realtors, highlighting the need for potential owners to be aware of potential cost increases.

Challenges in Estimating Property Taxes for New Builds

Unlike previously owned homes, new builds lack a tax bill because there’s no house to assess yet. Mortgage lenders often use an older tax rate from the area or an estimated tax rate to calculate the owner’s monthly payment. However, the actual property tax rate is determined by the county office after assessing the value of the new house.

Strategies for New Homebuyers

To gauge potential property tax changes, it’s important for buyers to understand how often the county reassesses property taxes and what the reassessment formula is based on. Consulting with a local loan officer who understands the area’s landscape can also provide valuable insights. Additionally, looking at real estate taxes listed online for similar homes in the neighborhood can give a ballpark estimate, but buyers should be cautious as these may not reflect the actual taxes they will pay.