Purchasing a new home can be an exciting and fulfilling experience, but it can also come with unexpected financial burdens. According to a recent survey by Real Estate Witch, nearly 75% of new homeowners have regrets about their purchase, with property taxes being the most common concern, surprising 33% of new owners. This is particularly true for newly built homes, where property taxes can change dramatically after purchase due to initial rates being based on estimates.
Newly constructed homes now make up 30% of the current market, a significant increase from the typical 10% to 20% share seen in previous years, as reported by the National Association of Realtors. With more buyers turning to builders for their housing needs, potential homeowners must be aware of the potential for increased costs shortly after purchasing a newly built home.
Unlike previously owned homes, new builds lack an existing tax bill as there is no house to assess yet. This leads mortgage lenders to use older tax rates from the area or estimated tax rates to calculate the owner’s monthly payment. The lack of a concrete tax assessment can create uncertainty for homeowners, as they may be paying an estimated property tax rate into escrow initially.
Counties typically reassess property taxes based on the value of new construction homes, which can lead to surprises for homeowners with escrow accounts. In cases where there is a shortage in the escrow account due to increased property taxes, the lender may cover the owed amount. The homeowner will then have to repay the lender through an increased mortgage payment to make up the difference.
As a prospective homeowner, it is crucial to understand how property taxes are assessed in the area you intend to buy a home. Consult with local loan officers and real estate professionals to gain insights into the reassessment frequency and formula used in calculating property taxes. Additionally, researching similar properties in the neighborhood can provide an estimate of potential property taxes, though it is essential to note that online listings may not reflect the exact amount you will pay.
Buying a newly constructed home comes with financial considerations that go beyond the initial purchase price. Property taxes, in particular, can fluctuate significantly after the purchase of a new build, leading to unexpected costs for homeowners. By conducting thorough research, consulting with local experts, and preparing for potential reassessments, prospective buyers can make more informed decisions when purchasing a newly built home.
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