Minneapolis Property Tax Sticker Shock:
Exhibit A B C D E W(??)
Where: 2737 Lake of the Isles Parkway in South Minneapolis.
What: 1903 Dutch Colonial with 5 BR/5 BA and over 5,000 finished square feet. The home is a foreclosed property being sold by the lender, Bank of America.
When: approaching 2 years of market time, beginning at $1.995 million.
How much: now listed for $999,900.
Even to a Realtor accustomed to seeing some ginormous* Minneapolis property tax bills, the whopper that goes with 2737 Lake of the Isles stands out.
Would you believe . . . $41,332 annually??
Me neither.
High Hurdle
Just to put that rather daunting number in perspective, that’s roughly the same as the annual principal and interest payments to buy this home, assuming it’s purchased with 20% down, and the rest financed over 30 years at under 4% (prevailing rates now).
By contrast, a $1 million home just 6 miles to the southwest in Edina — noted for its reasonable property taxes, amongst other things — might be one-third of that.
See also, “Minneapolis Upper Bracket Homes? What a PITI“; “Minneapolis Property Tax Sticker Shock“; “Minneapolis’ Property Tax Millstone“; “Putting the Brakes on Property Taxes“; and “Never Mind the Mortgage ” Can the Buyer Afford the Property Taxes??”
Purchase Price = Fair Market Value? Not Necessarily
At least part of the reason for the exorbitant property taxes is that the home’s tax assessed value is now signficantly higher than the asking price.
In a traditional sale (no lender involved), once there’s a closed transaction, the purchase price would presumptively establish fair market value for tax purposes.
However, the tax authorities regard foreclosures as “distress” sales (i.e., non-arm’s length).
As a result, the Buyer can’t assume that their tax bill will be dramatically lower once they own the home.
*Giant + enormous = ginormous.
