Builders will frequently pay lower property taxes on undeveloped property, and in many instances the real taxes on a newly built home won't take effect until the home receives a certificate of occupancy from the municipality, or until a buyer closes on that home, or until some other local requirement occurs that causes the local taxing body to raise the taxes to the level they should be.
But that doesn't mean that that the builder has misled the buyer. How property is assessed and billed is an important process for any buyer to understand.
Buyers should be aware that if real estate taxes seem too low, they probably are too low. If a buyer is working with a real estate agent to buy a home, the agent will often be able to alert them to the actual tax they should expect to pay on new construction homes
. Buyers shopping who shop on their own may not be aware of the real estate taxes they should expect to pay on a newly built home. They may miss out on other information as well. Frequently, these buyers find out from their lenders that the taxes on a newly built home will be much higher than what the builder was paying for the home, but they may not really understand that information in the context of the loan application or the total costs of owning and maintaining the property.
The buyer may sit down with the lender, who explains that he or she needs to pay a monthly real estate tax and insurance escrow to the lender computed using an estimate of what the taxes will be. But the buyer might not connect that monthly estimated payment with the information given to him or her from the builder.
Ilyce Glink's latest book is "Buy, Close, Move In!" Distributed by Tribune Media Services, Inc.