Buyer's and Seller's Beware - My observations....

[LeftHander]

Sellers are facing a glut of foreclosed properties to compete against. In the coming months hundreds of thousand foreclosed homes will flood the housing market joining the already clogged market. These homes were foreclosed on in recent months and in northern tier states expect them to hit the market in on big glut.

This may seem like bargain hunting territory for many buyers looking for that 40-50% discount on a prize home. But beware or tax assessments that are slow to react and property taxes that will remain at housing bubble prices.

Buyers (like myself) can find property 50% or more below market value of just a year ago. Here in the midwest the housing devaluation is starting to catch up to other areas fast. Already bank owned homes are deeply discounted and there are a lot of them to pick from. The seasonal nature of real estate sales has slowed the fall as buyers typically look to spring and summer for a move.

The problem is that foreclosed gem that was assessed at 175K that is now winterized and going for 65K. It also comes with a 175k assessment level tax bill. Suddenly your property tax escrow payments will be more than your mortgage payment with no signs of ever coming down. As assessments go down property tax rates will go up to allow municipalities to maintain tax revenue.

So be careful buyers and if you are selling...I don't know what to tell you other than good luck.

[Sherman A1]

1. Good point on property taxes

There was an article in our local paper about this last weekend. The assessments will not be changing too much despite the decrease in valuation.

It's pretty much a, "you are just screwed situation"

[glinda]

8. That happened to us in mid-MN.

We live in a small town and purchased our home two years ago because of low taxes which have since doubled and if Pawlenty gets what he wants, will go up again. We will take a loss if we sell also. If we can even sell. I called the assessor and were told the value went up. Yeah, right.

[all.of.me]

2. You should be able to refute your tax evaluation.

Where I am, an evaluation comes out every spring, and you have x number of days to object to it. Tax bills are sent out in fall. I don't know how long the process takes to get it changed.

Taxes here are not yet at market value. Mine are the same as when I bought my house ten years ago, but if I sell, they will surely double to the new owner. I've seen that happen with other homes.

[Coexist]

3. that is good to know

thanks for that info

[all.of.me]

7. Check with your county clerk or your assessor. nt

[Kittycat]

4. If you're in the Chicago area - also watch out for SSA Tax

Where the builder was too cheap, or wanted to make the house look like it cost less - therefore they didn't pay the fees up front for infrastructure in to your neighborhood. So instead, you pay an added tax (around $2000-3500 annually in this area) to help cover that cost. The SSA stays attached to your home for 30 years, and transfers to the new owner when you sell. You're required to disclose it, but it's often confused with regular taxes so people don't notice it.

When were looking to purchase our first house together (newly used or new construction) we discovered this, and ran far far away from anything - even if we liked it and could afford it. My biggest fear was trying to sell a house with that added tax. Long story short, we bought an older home first, then when we went to build - we scouted out all the builders to find one that didn't do this, in a community where the practice was banned. I have a feeling that it's going to be a lot easier for homeowners here to unload their homes, in this market - then say the towns just north/NE and south of us.

[.... callchet ....]

5. You are a buyer ?

Do you see the bottom ?

[LeftHander]

9. Buyer yes.....I have a need for more living space...

I don't see the bottom yet here in Wisconsin. I think it will fall alot by summer end.

My partner and I took on his niece and nephew after their father died this summer. And we are in a two bedroom apartment right now.

And my Daughter says she wants to stay with me this summer...when college is out for summer break.

[.... callchet ....]

10. So you are not an investment buyer.

I thougt you were talking about investment buying now.

[LeftHander]

12. no far from investment buyer....just coping with a situation....

looking for the best solution...and sharing some observations.

[KharmaTrain]

6. It's A Three Year Lag...

At least that's how it is around here. The county assess every three years and it's always worth a look at the tax records to see when the property was last assessed as well as any liens on it. The irony here is that the rising house values created massive property tax increases that started the default ball rolling.

While real estate looks attractive...you are spot on, there will be a bigger glut later on this year that is sure to bring prices down further. But the time to buy is after things hit bottom and the bulk of the bad debt is washed out. I would imagine we'll see either the banks or government eating the liens and offering other tax breaks or incentives to get the surplus moving again. But this is gonna take a couple years to wash through.

Cheers...

[ProgressiveProfessor]

11. With Prop 13 in California that is not an issue

I would have thought the assessments reset to market with sales in other states as well.