Housing Market Anomalies -- Late Summer, 2010

Ancillary Fees (& Taxes) Loom Larger

If you have to ask how much something costs . . . you can't afford it.

--Author unknown

One of the anomalies of today's housing market is more properties discounted to the point where their purchase price is suddenly very attractive -- the more so with interest rates seemingly falling through the floor.

However, they come with vestigial "ancillary costs" -- a ball-and-chain, if you will -- that are still pegged to the old asking price, deterring many of those same buyers.

Out-of-Whack Property Taxes

So, in Minneapolis alone, I can think of a dozen-plus homes whose asking price has now dropped from $1 million-plus to the high six figures.

However, they still carry an annual property tax bill that in many cases still runs $15k or more.

That's a problem -- financially and psychologically -- because the move-up Buyers for these homes most likely now own homes worth $400k-$600km, and are accustomed to property tax bills that are a fraction of that.

Even though the property taxes should re-set when a deal is consummated, there are no guaranties -- and the lag can be up to 2 years.

The same phenomenon can be a hurdle for properties that carry an association fee.

When mortgages are so cheap, suddenly that $300 -- or $800 -- monthly maintenance fee looms larger.

P.S.: Hey, fellow Realtors! Here's a freebie: instead of paying for the Buyer's closing costs, maybe such Sellers should contemplate paying down the property taxes for the first two years.

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