Barbara

cabovacation, I also am constantly amazed by the "endless money supply", although it may actually be coming to an end now...perhaps.

gail

"asking price" - one can ask anything they want for a house - I would think the selling price is what is relevant.

Barbara - property taxes are based on the "selling price"? in CA - that is a new one to me, although I admit I live on east coast. What if a property has not changed hands in a long time - what do they base property taxes on. Or are we talking about 2 different things. In Massachusetts there also is a law controlling rise in property taxes in a given town.

And property taxes are paid every year based on assessed value - they have nothing to do with appraised value, and ones justification for disputing their appraisal has to do with appraised comps (such as same size, similar location type) rather than anything to do with sale price.

I would think if an appraisal is that far off, the appraiser messed up.

LoveItaly

In CA the property tax is based on the sales price of the property. In my county it is around 1.25%. Due to Prop 13 that was passed by the CA voters in 1978 property tax can only go up 2% a year. So if a property owner has lived in their house for decades their property tax is much lower then say the house next door that just changed owners last year.

I just read an article this morning regarding house values in my county which evidently has had one of the hightest increases in prices these last few years. Some experts believe prices will drop by 12% between now and 2008. Others think 12% is to high of a figure. But due to more houses on the market inluding houses that have been built by developers (they are now giving bonus packages to buyers to entice them to buy their producet) it appears that probably the multiple bids on houses for sale has reached it peak as there is a high inventory of houses for sale and they are staying on the market longer.

Due to a high percent of buyers that have taken out adjustable rate mortgages and interest only mortgages foreclosures are up also. Sadly many people that have purchased houses in the last year or two will owe more on their house then the value of the house.

I think if I were going to buy another piece of property I would wait for some months to see where prices are going.

I would also imagine that property owners will be contesting their property tax values in a year or two if they recently purchased a house and values do go way down.

Barbara

gail, the State sets property tax at 1% of the selling price. Local authorities, school districts and other entities are able to put bond issues before the voters to raise money for whatever. They have to lay out the details very precisely to get them passed and they will add a specific amount of money to your property tax for a specific period of time. Obviously, these are not huge amounts of money otherwise people wouldn't vote for it.

I remember in the early 90s when property prices went down, some people were able to lower the amount of property tax they paid. Of course, they weren't so high as they are now to begin with. In San Diego, there is a huge increase in the number of people in foreclosure. Salaries here have not kept up with the cost of housing and many,many people have very dodgy loans. also, many, many people used up a lot of the "equity" in their home either to remodel or to pay debts and buy toys. My feeling is that the huge increase in the cost of housing here has been fueled by speculation and greed much more than supply and demand.

cabovacation

Barbara has it right. Although right now it is hard for me to say that we will see prices dropping very much. It's only in hindsight that we can tell But I predict that in January and February, when the market opens up again, we won't see much change at all. It is endlessly interesting, though, isn't it?

trippinkpj

On prices in San Jose, I think homes in the upper 600's to lower 800's, will hold their prices better than the million plus priced homes which may drop next year. Who really knows though...

gail

Thanks for the explanation of how CA does it. In Massachusetts it is based on assessed value, so towns to reassessments whenever it is beneficial to them.

We have something called Proposition 2 1/2 that regulates total amount of property tax a town can collect with increase based on total value of properties in that town - so if they continue to build multi-million dollar houses, everyones taxes can go up. Tax rate per $1000 assessment is reset every year.

Years ago assessment was, in dollar terms, not really meaningful. All that mattered was that if there were identical houses across the street, they were assessed the same. Now it is closer to appraised value to add to property tax base in each town.

J_Correa

Prop 13 definitely causes inequalities in property taxation. It can also put people in a bit of a spot if they should decide to move.

My mom, for instance, has owned her house for 15 years. Her job was recently outsourced, but she has been offered another job that she really wants to take, but the new job is almost an hour and a half commute from home. The obvious choice to to relocate closer to the job, which she could do and buy a comparable house for a comparable price - basically a lateral move. Unfortunately property taxes are a big consideration. Her house is worth about 4 times what she bought it for 15 years ago. If she moves, then her property taxes will go up significantly.

Dayle

Redrockglass,

You don't say where you live now. California is a whole different universe! You had better do more homework and compare housing prices and cost of living. See if your company is going to be paying you enough to make this relocation affordable

LoveItaly

Hi J_Correra, is there any chance that the county your mother lives in has an agreement regarding the county that she will need to move to wherein her tax basis will be transferred to her new house? I can't remember all the details unfortantly but unless things have changed I remember reading more then once some time ago that certain counties in CA have this agreement. It might be worth checking into.

cabovacation

it's true that within and between a few counties in CA the tax basis can be transferred one time only for residents that meet certain requirements, including that they are over 55 and that the house they transfer to is worth withing approx 5% or less of the home they sell...and it has to have been the personal residence, etc. Always consult a tax professional for these things!

trippinkpj

CaboV- Do both owners have to be 55 plus, to qualify for the tax transfer? Just curious, not that we plan any change soon.

LoveItaly

Hi trippinkpj, the person selling their house has to be over 55. It does not matter what age the buyers of their house are. And it does not matter what the age of the owners of the house that is purchased is either. But I think only something like 12 counties in CA have this agreement, cabo probably knows. And I can't remember if this applies to these counties if the seller buys another house in the same county. Cabo???

trippinkpj

What I meant was, say my husband and I are selling our house and buying another one next year. I would be 52 and my husband 58. Would we qualify?

J_Correa

Thanks for the heads up about transfering the tax basis. I will have her look into that.

cabovacation

Trippin...only one person in a couple has to be 55. And it's a one time only deal, too....the tax transfer deal. It works within the counties and between them - just the ones who offer the deal. So - it works within Santa Clara county, for example. You can always call any title company for a list of counties.

trippinkpj

That's good to know Cabo. We'll keep that in mind.

Armani_Rugpilot

This is a one month old already, but some good misinformation here with the good information. Certain to filter the two so you get the good parts.

So many people refer to an area as San Jose and knowing a $1.6M price for a house it can be only few places such as Almaden, Mt. Hamilton, Silver Creek - mostly at the golf club surrounds there, or a homestead with larger lot than a 1/6 acre standard postal stamp, and some Willow Glen or Victorian house downtown prime spot.

Then the areas touching SJ get throw in with the stories. So the Los Gatos, Cupertino, with the hills in that pricing ranges.

Telling me if this is wrong, but I reading the median price is $735,000. A person can wise to buy the 4 or 3 bedroom house know that holds the strong demand over time. The 8 bedroom house is more special market segment may not always have the high demands like the 4 bedroom.

Buying a 100% finance home is not uncommon in the area and people wanting the risk OK of the optionARM loan. They have the idea the house is going up 10% every year and 1.5% part of the interest payment can be comfortable as that house is for investment - not always for keeping. And interest only loan can be a best tool for a home owner in the valley here. I not saying how I know this, but you knowing I have more than one house here.

You have a need for hazard insurance around $60 per month and taxes could be $765 per month on top of house payment and the banks want to seeing 2 months or 3 months of these total for the best loan rate for you. If you not having this savings or asset, they still make the loan at a higher rate for interest.

Do seek truth in all your travels and you will never be overmortgaged, overpriced, or overtaxed.

AR

trippinkpj

My area of San Jose, Cambrian which I mentioned earlier, has nice older homes in the high 600 K's & low 700K's. So my immediate area is slightly below the median. There are other decent/ low crime neighborhoods like this also. Blossom Valley, parts of West San Jose and Campbell also.

kswl

Appraisals are done solely for the mortgage lender, to assure the lender (although not "insure"--Fannie Mae does that) that the loan is appropriately collateralized.

There is frequently a difference between the appraised value of a house and the contract price. When the appraised value is lower, one of a few things can happen: the RE agent gets angry and they order a new appraisal from someone who will hit that number, OR the buyer comes up with the difference in cash. When the appraised value comes in higher than the contract price, instead of loving the fact that they have a lower LTV ratio than before, and therefore a greater equity cushion, most buyers rush out and take a line of credit or 2nd mortgage for furniture or a new pool. Sad, but true!

Redrock, do your homework. Find an appraiser in San Jose and offer to pay him or her for their time at an hourly rate of at least $50. Get addresses of some houses you've seen with an agent. Have the appraiser run a few numbers for you with comparable properties (comps), search the county tax digest, and come up with a realistic bid for a house. This is basically the only way you can be sure you are not overpaying for a house, and very few people take the time to do it. Spending $300 can save you many thousands of dollars.