Minneapolis Property Tax Disconnect
Pop quiz: the annual property taxes on this Kenwood short sale — listed at $349,900 — are . . .
A. $3,142
B. $4,475
C. $6,020
D. $13,983
Answer: “D.”
Assuming that the eventual Buyer has good credit, is putting down 20%, AND the short sale is approved at the list price — all big assumptions — that means that their property taxes will be more than their mortgage payments!
And while the new owner might expect their property taxes to drop dramatically, post-closing, that’s also a big assumption.
So, even though the current tax assessed value is $502,000, because of the two year lag setting property taxes in Minnesota, it will be 2013 before the lower sales price kicks in.
And THAT assumes that the taxing authorities will accept that the purchase price — presumably around $350k — reflects fair market value.
Lots of “If’s”
In fact, at least in Minnesota, there is a presumption that short sales and foreclosures are NOT arms length transactions, and therefore the tax assessed value need not be re-set, post-sale, to the sales price.
That’s the case no matter how long the property has been on the market, and no matter how many higher asking prices have been tested (and rejected by Buyers).
Of course, even if the Buyer succeeds in getting the tax assessed value lowered, there’s no guaranty that the mill rate won’t be hiked, negating any savings.
Property Tax Albatross
Bottom line: the prospective Buyer of this home had better be able to afford both the mortgage AND the exorbitant property taxes, at least for two years.
Can you say, “Property tax sticker shock?”
How about, “No, Thank You?”
In this Realtor’s opinion, Minneapolis had better act, fast, to correct its property tax albatross, or the City is going to face much bigger problems in the near future.
Starting with lots of vacant and deteriorating, once-elegant homes, and a shrinking tax base.
P.S.: One other “stealth” Minneapolis tax: the perception (in at least some quarters) that the public schools are substandard, and therefore homeowners need to shell out for private school.
