TAX SAVINGS OPPORTUNITY: Assessor Extends Deadline to Apply for Decline-In-Value Reassessment

Your blogger had the opportunity to meet Los Angeles County Assessor John Noguez today at County Supervisor Don Knabe's Annual "State of the County" Luncheon. I took the opportunity to thank him for extending the deadline for homeowners to apply to have their home's value reassessed, from November 30 to December 31.

This is an important second chance to reduce your property taxes based upon a decline in value of your home since it was purchased or last reassessed!!! Here's the verbiage from the official press release:

Assessor John Noguez Authorizes a Grace Period through December 31 to File a 2011 Decline-in-Value Review Application

Los Angeles, CA - Los Angeles County Assessor John R. Noguez has authorized a grace period for 2011 Decline-in-Value Review applications through December 31, 2011. This extends the November 30, 2011 deadline to submit an application. During this time period, the Office of the Assessor will continue to accept and process completed Decline-in-Value Review applications. The application is for property owners who believe that their property should be reviewed for a temporary adjustment for the 2011 assessed value if the property suffered a "decline-in-value" as allowed by the California Revenue and Taxation Code. Assessor Noguez stated, "I granted a grace period in an effort to offer as much assistance to taxpayers as possible during these difficult economic times. It is our public duty that we give property owners every single opportunity to have their property accurately reviewed if they believe they have suffered a decline-in-value in 2011." Applications will be processed if they are filed and postmarked by December 31, 2011. The application can be filed either online at http://assessor.lacounty.gov or obtained by calling the Los Angeles County Property Tax Information Line at 888.807.2111 to reach the Office of the Assessor. IMPORTANT NOTE: This Assessor's Decline-in-Value Review Application filing grace period applies only to an Assessor's Office review. This grace period does not apply to the Los Angeles County Assessment Appeals Board filing deadline of November 30, 2011 for Regular Assessments.

How Does Your Real Estate Tax Bill Compare To Other Parts Of The Country?

Mortgage rates may be a function of free markets, but real estate taxes are a function of government. And, depending on where you live, your annual real estate tax bill could be high, low, or practically non-existent.

Compiling data from the 2009 American Community Survey, the Tax Foundation, a non-partisan educational organization in Washington D.C., published property taxes paid by owner-occupied households, county-by-county.

The report shows huge disparity in annual property taxes by region, and by state.

As a percentage of home valuation, Southeast homeowners tend to pay the fewest property taxes overall, while Northeast homeowners tend to pay the most. But statistics like that aren't especially helpful. What's more useful is to know how local real estate taxes stack up as compared to local, median household incomes.

Not surprisingly, real estate taxes are least affordable to homeowners in the New York Metro area. The 10 U.S. counties with the highest tax-to-income ratios physically surround New York City's 5 boroughs. The areas with the lowest tax-to-income, by contrast, are predominantly in southern Louisiana.

A sampling from the Tax Foundation list, here is how select counties rank in terms of taxes as a percentage of median income:

• #1 : Passaic County (NJ) : 9.7% of median income
• #6 : Nassau County (NY) : 8.6% of median income
• #15 : Lake County (IL) : 7.2% of median income
• #18 : Cheshire County (NH) : 7.1% of median income
• #70 : Travis County (TX) : 5.0% of median income
• #90 : Marin County (CA) : 4.6% of median income
• #110 : Middlesex County (MA) : 4.4% of median income
• #181 : Sarasota County (FL) : 3.9% of median income
• #481 : Douglas County (CO) : 2.4% of median income
• #716 : Maui County (HI) : 1.3% of median income

The U.S. national average is 3.0 percent.

The complete, sortable list of U.S. counties is available at the Tax Foundation website. For specific tax information in your neighborhood or block, talk with a real estate agent.

What Does It Mean To Escrow Taxes And Insurance?

The fiscal responsibility of a homeowner -- in the South Bay and everywhere else -- extends beyond the mortgage's basic principal and interest repayments. Homeowners are also responsible for the real estate taxes on the home and its insurance premiums, too.

Failure to pay taxes can lead to foreclosure, and failure to insure is breach of your mortgage contract.

As a homeowner, you have a choice about how you manage your real estate tax and insurance bills.  You can choose to pay them from your own bank account when the bills come due, or you can choose to pay 1/12 of the annual bill to your mortgage servicer each month, and then let your servicer pay the bills on your behalf when they come due.

Not surprisingly, servicers prefer the latter method -- it reduces two major lender risks:

1. That the home's real estate taxes go delinquent and are sold to a third-party
2. That the home endures catastrophic damage during a lapse of insurance coverage

In theory, when the servicer is paying the bills, the home's taxes are always current and the home's insurance is always paid. This method of managing taxes and insurance is commonly called "escrowing".

To calculate a home's monthly escrow payment is simple. Just take the sum of the annual real estate tax bills and insurance bill, then divide it by 12 months in the year.

As a example, a $4,000 annual tax bill with a $800 insurance policy = $4,800 annually = $400 paid into escrow monthly. These monies are collected as part of the regular mortgage payment along with the mortgage's scheduled principal + interest payment.

Homeowners choosing to escrow tend to get the lowest rate, lowest fee loans. This is because lenders often charge a premium to "waive escrow" (i.e. pay their own taxes and insurance). Escrow waiver fees vary between banks, but can range up to half-percent of the amount borrowed. The larger the loan, the stiffer the penalty in dollar terms. 

Choosing to waive escrow can also raise your mortgage rate by up to 0.250 percent.

If you're unsure whether escrowing is right for you, talk to your loan officer and/or financial planner. There's good reason to go either route depending on your profile.