Property Taxes: The Bitter Truth

Property owners are charged yearly by local cities for overall maintenance of the city’s infrastructure. Schools and colleges are funded by the property taxes. Major chunk goes to the development of city’s facilities , salaries, and pensions. However, home owners are unable to digest the hefty bills every year.

Property taxes are the bitter truth of home ownership and if you are in one of the highly taxed states such as Illinois and New Jersey, you better get another job just to pay the property taxes! Some property owners end up paying up to ten percent of the total valuation of the property. The cycle for the property taxes is determined by a pre-defined process set by the city and state. Every year school districts decide the points to charge the city for operating the schools. State taxes may be less but the additional taxes charged by the cities for giving tax deferments to businesses makes the final rate higher. Cities with alternative income sources such as sales tax or income tax may charge lesser property tax.

You can expect a bill compared to a similar homes in your neighborhood. If you did a home improvement in a year, you must notify the city so they can reassess your property for adjusting the taxes. Commercial or business property tax may be different from residential property taxes. Check the local counties website for assessment search in your area.

Notifying the mortgage company and monitoring the city’s records whether the property tax is actually paid by the mortgage company is needed. For new construction properties, the initial mortgage may include only the property tax on the lot. Once the assessment is completed your escrow and mortgage can be adjusted to include the new property tax. Keeping a track is also necessary even if paying by other methods such as cash or check or credit card.

Property tax can be deducted from income taxes but also depends on the government tax rules. It is mandatory to pay the property tax bills similar to any other bill. Owners do maintain all the bills issued and paid. While enjoying the perks of home ownership, owners are also prepared for the yearly property tax bills. 🙂

New Construction Quad Cities

Quad cities is the bursting market with opportunities. With booming development in between Chicago and Des Moines, QC is the top favorite for many. The lack of custom homes is a challenge in the area and the demand for new construction homes is rising rapidly. Realtors and builders are working along with property seekers to accomplish the new construction homes in Quad Cities. If you are a first time home builder, you are prone to many challenges. Here are some insights.

Quad Cities

Quad Cities may first look like typical MidWest area where nothing ever happens. 🙂 However, QC is developing rapidly and everyone is having hard time to cope up. John Deere, Alcoa,  and local school districts, are some of the major employers in the area. Greater Quad  Cities is also seeing  many new manufacturing, construction, highways, bridges, and small business developments.  Prospective home owners in the QC are seeing shortage of new homes. Some are surprised to find the cost of living in the Quad Cities same as cities such as Dallas, TX or Columbus, Ohio. Some big city home owners are amazed to see the quality of the homes we get in our area when compared to the price they put in the big cities.

New Construction

Home is one of the largest investments and many of us have a very careful approach for a new construction property. Buying an existing property with established facilities and landscaping is a popular choice. Due to the shortage in the Quad Cities, many opt for a new construction which turns out to quite daunting to some. 🙂

  1. Budgeting: Home owners must have a clear budget on the new construction based on the family income. Down payment, mortgage, property tax, HOA fees if any, and home improvement costs must be considered before starting out for a new home. Expect to cross the budget during the complete construction process. 🙂
  2. Area and Builder: Choosing the lot according to your preferences such as proximity to work and school districts is crucial. Next step is choosing a builder who can complete your dream home. Select a new construction builder or a general contractor who specialize in custom homes. It is better to choose the builder with appropriate permits and insurance. Some builders offer to take the construction loan for you or others may direct you to the banks that offer construction loans. Anyway, you end up paying the construction loan interest. 🙂
  3. Contract: A contract need to be signed after reviewing the estimations. You can choose to have a realtor based on the builder. Some avoid realtors to escape the cost of seven percent. Most builders in the QC charge a builder commission fee from ten to fifteen percent. Your negotiation skills may come in handy at this time. Other components are charged same by most builders depending upon who they subcontract. It may be essential to add change clauses and late delivery clauses.
  4. Design: Expect one or two months to finalize the design. Some initial idea is needed as how much square footage the home is going to be after leaving the required offsets. Type of vault, Room sizes, bathroom placements, media room, and any customized options need to be brainstormed at this time. Owners may not be surprised that the design keeps on changing as the construction progresses. 🙂
  5. Selections: Home owners are required to select many aspects of the house. The basics such as foundation or drywall material will be common in the area. Some external selections such as roofing or siding may be mandatory depending on the HOA or city rules. Crucial selections that have huge impact on the final cost include flooring, cabinets, electrical fixtures, landscaping, plumbing fixtures, appliances, paint colors, and so on. You can upgrade to advanced options or select the basic ones provided by the builder. It may seem confusing and daunting, but it is required to look up the options and check out the samples and reviews before finalizing. It will be like a selection marathon where as soon as you are done with selecting one item, you will be presented with more options to finalize another! 🙂 You will always skeptical about how the total cost is going to change if you choose a particular selection.
  6. Waiting: This is the most killing aspect of new construction homes. Expect delays as the new construction is extremely dependent on weather and labor. Rains are the show stoppers for all exterior work. Any high end work is dependent on the availability of the labor. If one of the subcontractors who committed has any emergency, that task will be delayed. This is true with big and small builders alike. Phased out tours are planned for big builders and small builders let you visit every day.
  7. Locking the mortgage rate: You are required to lock the mortgage rate before 30, 60, or 90 days of your closing. Banks and financial institutions do allow some time to lock and if any delays occur, you need to notify the bank so they can extend the rate lock for another 30 days for a charge. Banks also do require you to finalize a home insurance provider before processing the loan pre-approval. Skip this step if you are paying cash. 🙂
  8. Appraisal: Banks send for a neutral appraisal before processing the mortgage. The appraisal is a mandatory process which will decide how much that property can be valued for. The entire appraisal depends on many factors such as similar homes sold in the area during past six months or the facilities such as wood flooring or deck.
  9. Inspection: The property needs to pass several inspections from city and HOA. Those approvals are necessary and also assure that the property is being built in a safe and acceptable manner. Any recommendations must be completed before closing. An Occupancy Certificate will be issued if all the requirements are met. A Temporary Occupancy Certificate may be issued which must be corrected later.
  10. Closing: A final walk thru before closing is suggested with all the involved parties. Check every light, tap, door, and so on to note any discrepancies that need to be fixed. Your banker and realtor will prepare all the necessary documents required at the time of closing. All documents can be shared electronically and signed on the closing day. You are required to pay the down payment and closing charges at this time. If you have opted for a for-sale-by-owner, you both can hire individual lawyers who can take care of the paper work. It is your responsibility to check for the accuracy of the paperwork as the lawyers do tend to have mistakes in their forms.
  11. Post-moving checks: Once you move in your new home, keep checking the house interior and exterior for any issues. Within the one year warranty that is common in the Quad Cities, you can ask for any faults or bad installations. Note down the warranty period on the appliances and HVAC so you can seek out the fixes. Minor cracks in flooring, walls, paints, and so on can be fixed.

New construction homes are definitely a thrill to enjoy but do expect some out of pocket expenses every month. You will be tempted to make changes with the change in seasons. Peer pressure in terms of improvement and buyer remorse  when property bills arrive are common side effects. An extra fan, an upgrade in the doors, added landscaping, and so on will be needed in the first year or every year. 🙂 Let me know any other tips for new construction homes in the Quad Cities.