Tucson AZ Home Loan Info

head_left_image

Property Tax Knowledge Can Help You Sell Houses Till The Cows Come Home!

Cow on reclaimed mining claim tailings

As a lender, I'm interested in property taxes on a purchase transaction because they directly affect a borrower's Debt To Income Ratio

A REALTOR referral partner of mine recently sent me a first-time Tucson home buyer of less than substantial means.  The buyer's income restricted the purchase price of the home severely, but his credit was good, and there was nothing unusual about qualifying him. 

In today's market, it's possible to buy a Bank Owned foreclosure in greater Tucson for less than $80,000.  That's just what the REALTOR found for his buyer, and they were excited to write the offer. 

That's when I found that the property taxes for this particular home were more than 1/3 of the total monthly PITI payment for the buyer, and it killed the deal on that particular house.  He could afford the principle and interest payment, but he couldn't afford the property taxes!

Lesson Learned

REALTORS, do some digging about the tax structure of particular towns and townships in your selling area.  That's what the three of us did ~ the buyer, my REALTOR friend and I.  ...and it's why you see the picture of that cow in my post!

That's a feed lot operation on the side of the mine tailingsSome municipalities have done what a lot of us are doing in this difficult market.  They're depending on multiple streams of income for their operating revenue.

The towns of Sahuarita and Green Valley, Arizona have tax revenue from mining operations in addition to the usual tax base of residential and commercial property.

The hill there on the right is a "mine dump."  It's been created by the buildup of crushed depleted ore. 

If you look very closely at the top of the hill, you'll see a business.  A ranching business.  A feed lot raising cows!

The mine owner has leased what has historically been considered worthless land to a rancher.  The price for the rancher is attractive, making it profitable for him to raise cows for sale.

  • The mine pays taxes. 
  • The rancher pays taxes. 

And the tax structure overall is such that my REALTOR referral partner was able to find his buyer a home that he could afford!  The price was higher, at $87,500, but the property taxes were substantially lower that those on the first house.  The overall payment was much lower!  We're closing on February 24th!

Lesson?  Be inquisitive.  Find out where the tax revenue comes from in your neck of the woods.  Armed with critical information, you're likely to create more success than the other agent who just looks at the price of the home in the Multiple Listing Service.

A feed lot operation in mining country

___________________ 

I'm Mike in Tucson, your preferred Tucson Mortgage Lender.

NMLS #223495

SUNSTREET MORTGAGE llc ~ Mortgage Bankers, Not Brokers!
Offices in Scottsdale, Tucson, and Nogales, AZ, and Albuquerque, NM.

Call me on my Blackberry  (520) 349-9090

photos copyright Mike in Tucson

Comment balloon 50 commentsMike Jones • February 02 2010 04:45AM

Comments

Good tip. Some of the property taxes here in Florida doubled and tripled during the boom but have coming down at a rate of about 2-5% per year. I sold a house for $89,000 and the yearly property taxes were $4300! 

Posted by Jeffrey Smith, Short Sale Education (Author of 'Realtors Guide To Short Sale Success) over 9 years ago

  • The mine pays taxes. 
  • The rancher pays taxes. 
  • Correction.

    • The land owner pays taxes.
    • The mine pays taxes. 
    • The rancher pays taxes. 

    Another example of the tax man taking and taking and taking.  All on the same property.

    Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 9 years ago

    Mike:

    The cost of the tax bill is a driving factor for many of my buyers since the towns I work in can vary greatly in this area.  It is an important part of arriving at the total monthly cost of any home.

     

    Posted by Claudette Millette, Buyer, Broker - Metrowest Mass (The Buyers' Counsel) over 9 years ago

    Real estate taxes in New York City apartment buildings are affected by many factors, tax abatements, historical designations, management.  You are very correct that looking at the purchase price and not the real estate taxes is an often overlooked cost with ownership.

    Posted by Morgan Evans, LICENSED REAL ESTATE SALESPERSON (Douglas Elliman Real Estate) over 9 years ago

    Mike - This cost needs to be escrowed with the monthly payment so it is an important part of determining whether or not a buyer can afford to purchase a specific home. There can be a big difference in cost between two identical houses on the same street if they have different zip codes.

    Posted by Judy Jennings, Broker - The Lanterns at Warren Woods - Ashland MA (The Green Company) over 9 years ago

    I advise prospective buyers of condos the same thing - the condo fees on top of taxes can knock the PITI so high that the buyer won't qualify at the price they otherwise would have.

    Posted by Brian Schulman, Lancaster County PA RealEstate Expert 717-951-5552 (Coldwell Banker Residential Brokerage, Lancaster PA) over 9 years ago

    Taxes have been smothering this country for years, The next thing to be over taxed will be the internet, and I will not be happy.

    Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) over 9 years ago

    Mike "Be inquisitive" ... so true, that is what it is all about.  I think the best Realtors and Loan Officers think outside the box, are inquisitive and search and find solutions.  Great blog !  After this comment, will be subscribing to your blog and will send you an email on another note !

    Posted by The Somers Team, Real People. Real Dreams. Real Estate. (The Somers Team at RE/MAX Access) over 9 years ago

    Great post, and one that many agents should read.  Homes can vary greatly when factoring in taxes, and sometimes, insurance, again depending on location.  Very smart! 

    Posted by Suzanne McLaughlin, Sabinske & Associates, Realtor (Sabinske & Associates, Inc. (Albertville, St. Michael)) over 9 years ago

    Suzanne,

    They sure do, don't they?  In this case, the REALTOR found the answer, and our buyer benefits!

    Christopher & Stephanie,

    We miss Philadelphia!  Congratulations on your successful referral of your client!

    Larry,

    Taxes were headed in the right direction under Reagan!

    Brian,

    You're right to do so!  Thanks for commenting.

    Judy,

    And that's the truth!

    Morgan,

    I hadn't thought of the effect in a place like New York City.  Thanks for your comment.

    Claudette,

    You're right about that; it can make or break a deal.

    Lenn,

    We are sorely overtaxed in the United States, and it's a little like the frog in the hot water.  It heats up incrementally, and he doesn't notice until it's too late.

    Jeffrey,

    Whoa!  That makes Tucson look like pikers by comparison!

    Mike in Tucson

    Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

    Mike,

    I keep harping on getting back to basics, but considering the property taxes is on the level of potty training!

    Bill

    Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 9 years ago

    Bill,

    In his defense, my agent friend is new at his calling.  :)

    Mike in Tucson

    Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

    Mike

    Very informative post.

    Good luck and success.

    Lou Ludwig

    Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) over 9 years ago

    In Oklahoma County, the government is flush with money. They bought the abandoned GM plant, retooled it for the Air Force, and now it is being used by Tinker Air Force base as a profitable rental. The amount of creative thinking here in the Heartland makes me proud.

    Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) over 9 years ago

    Hmmm...Mike, I wonder how well such innovative means of developing multiple streams of income would work in the older parts of the country, like New England...

    But you otherwise have a valid point, we have to consider all of the factors that affect a buyer's ability to afford a home, including the taxes.

    Posted by William James Walton Sr., Greater Waterbury Real Estate (WEICHERT, REALTORS® - Briotti Group) over 9 years ago

    Taxes!  Why must everyone constantly use the "T" word in my presence????

    LOVE THE COWS!  Thanks.

    Posted by Jenna Dixon, Empowers You With a Better Real Estate Experience (DRA Homes | Cobb County Real Estate ) over 9 years ago

    It seems like most people in my area know about Proposition 13 and the limits that were placed on property taxation.  But they are completely confused when it comes to 'Mello-Roos' taxes and 'Community Facility District Taxes' which often times kill a deal in our area.  So I usually have a discussion with my buyer clients early on to make sure they know about these additional taxes if they're looking in an area that is likely to have them. 

    And when I have a listing with a higher rate I need to do a better job of making sure that the buyer's agent knows to look into these at the time they're submitting an offer.  It's hard to really call it out in the listing because I don't want to deter showings but I've also lost escrows when the buyer figures out the actual tax situation.

    Posted by Michael J. O'Connor, Eastvale - 951-847-4883 (Diamond Ridge Realty) over 9 years ago

    Mike,

    Excellent advice...taxes on some luxury properties around here are very exhorbitant and could stop financing from going through....

    very innovative rancher!

    Jo

    Posted by Jo-Anne Smith over 9 years ago

    What a pretty cow! Taxes are always upper most in the minds of my buyers in todays market. It seems to be the first question out of their mouths. So I know the answer before we go out!

    Posted by Corinne Guest, Barrington Lifestyles (Corinne Guest, REALTOR® | Barrington Realty Company) over 9 years ago

    Mike, great advice and a great photo of the cow.  First question we had for our Realtor before buying land and buiding our house in WV, was "what are the taxes for the area?  Of course, taxes were lower than Virginia.

    Posted by Rebecca Gaujot, Realtor®, Lewisburg WV, the go to agent for all real estate (Vision Quest Realty) over 9 years ago

    Judd ReynoldsLove the pictures of the cattle. Several of the counties in my area have the tax bills online, so I can look them up 24/7 (great when I get a real interested person calling after 5pm. Others, though have to be contacted by phone, you guessed it, 9-5 only. The tax rates are not consistent, so unless you happen to know the actual tax bill of the house next door, its not wise to "use your experience". This is especially true in some of our rural areas like you pictured. Automated information is also great when working BPOs. I have to keep in mind which county the property is in. If it is a short turn around, I might need to verify tax data by mid afternoon.

    Posted by Judd Reynolds, Savannah, GA (Exit Team Realty) over 9 years ago

    Moooooo. Just let me survive in an Airstream in AZ. Then I could work with you, be around more cowboys, and reduce my !@#$% taxes.

    Posted by Susie Blackmon, Ocala, Horses, Western Wear, Horse Farms, Marketing over 9 years ago

    I like the idea and yes it always pays to be knowledgeable on this subject. But I also agree with Lenn, what isnt tax at least twice anymore!!

    Posted by James Lyon (Vista Pacific Realty) over 9 years ago

    Love the blog and the pictures.  I totally agree with you.  Taxes are important factors to know.  I learned the hard way.  IF only I knew this in the beginning, I probably would have saved alot of time house hunting with my buyer clients.  Thanks for the reminder.

    Posted by Raine Spivey, Realtor (REIGN REALTY) over 9 years ago

    The game has definitely changed.  We need to have more facts prior to prequalifying buyers these days.  Good points in your blog, good job getting the deal done and making someone a happy home owner.

    Posted by Kyle Jan, Phoenix AZ Homes for Sale over 9 years ago

    Great tip!  Don't you just love taxes??  And who knows, by tomorrow tax laws change so frequently what new law will aprise.

    Posted by Michael and Cheron Lange, Associate Broker, GRI (Solutions Real Estate) over 9 years ago

    My buyers all ask about taxes, and some not just the amout of property tax on a particular home, but also the basis of the tax.

    Posted by LLoyd Nichols, SW Florida Homes (Premier Florida Realty of SWFL) over 9 years ago

    Our listing sheets show the property taxes.  I suggest to buyers they get the monthly PITI payment, and based on the average tax what that would equate to as far as purchase price. 

    Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 9 years ago

    Taxes are a huge factor here in Ohio - recently our MLS was pulling incorrect taxes through (double) and wow, that is something that you don't want to mess with. No showings whatsoever until the problem was found for two of my listings. I hate taxes even more when stuff like that happens.

    Posted by Dawn Maloney, 330-990-4236 Hudson & Northeastern Ohio (RE/MAX Trinity Northeast Ohio Real Estate Specialist) over 9 years ago

    So true, just good old fashioned basics. With a ll the changes in the tax assestment I tend to start on the high side and adjust from there based on the specific property. thanks for the reminder, moooo

    Posted by Markita Aldridge-Woods over 9 years ago

    Great post.  Taxes can make all the difference in a buyer being able to afford a particular home, and espceially in the $100,000 and under market, they can make a HUGE difference! 

    Posted by Stephanie Frost, CDPE, SFR (Sellstate Next Generation Realty) over 9 years ago

    Do you think that having a listing showing that kinda of stuff would help

    Such as monthly payments that INCLUDE Taxes, HOA, Insurance (and closing costs along with the payments)

    You know what, while we're at it, lets add the interest rate and APR

    Yes, it does exist and it can be added to your current listing

     

    Would that help

    Posted by Chuck Ward Local Video Marketing, SMS Marketing, Google Plus Local Pages (Florida Mobile Fusion Mobile, Marketing, Local SEO) over 9 years ago

    Knowing the property taxes is crucial. This is a really valuable post.  I have a client who bought a house about 15 months ago with Mello Roos taxes in addition to the base tax rate (in California).  She was informed of the taxes before deciding to put in an offer so she had knowledge of it.  But she just found out that the lender did not do his due diligence in figuring out the taxes for her payments.  The Mello Roos taxes weren't included her mortgage payments and now the lender wants more every month to make up for the shortfall and to start including the additional taxes in her payment.  This is causing huge problems for my client.  So it isn't just the Realtors who need to be on the ball regarding taxes. 

    Posted by Vicki Pedersen, Providing Exceptional Real Estate Service (Pedersen Real Estate) over 9 years ago

    Taxes are one of the most asked questions we get these days.

    Posted by Ted Tyndall, I will help You find the Home YOU want to Buy (Davidson Realty Inc.) over 9 years ago

    You'd think that with the increase in tax abatements, the towns would realize that today's homeowners are much more 'in tune' with property values than the assessors seem to be.  I used to recommend to my new home owners that they fight the assessment, but with everyone else doing it the towns can't meet their revenue goals, so no one wins - they just up the rate and decrease the value the next year.

    Posted by Martin Kalisker, Professional Standards & Legal Assistant (Greater Boston Association of REALTORS) over 9 years ago

    Mike, this is so true in our area where properties run into the $4M + and as low as $10K and under. Depending on where a house sits ( coastline, bluff, or inland valley) the taxes on a home in the $300K-$400K can be significant. 

    Posted by Sherry Siegel, Managing Broker, EcoBroker, ABR (BrokersGroup, serving Sequim and Port Angeles) over 9 years ago

    Mike,

    This is something that we need to keep in mind.  As a matter of fact this is the first time I have heard about this and I find it valuable.  Thank you my friend.

    Posted by Don Rogers, Realtor, Broker, CDPE, GRI, OnullFallon MO & St Charles County MO homes (Keller Williams Realty Chesterfield) over 9 years ago

    To #34 . . .

    This wouldn't fly in my local area.  Why?  Because this is not the total closing costs.  There's no escrow fees, pro-rated taxes (or taxes held in advance), title fees, hazard insurance premiums.  These comprises closing costs in our area.

    30 YR FHA

    Home Value : $194,500
    Length 30 Years
    Down Payment (3.5 %) : $6,807.50
    Amount Financed : $190,977.12
    Interest Rate : 5.50%
    Actual APR 5.68%
    Origination Fees (1 %) : $1,909.77
    Total Closing Costs $3,838.77
    Monthly Breakdown
    Principal & Interest : $1,084.35
    PMI / MIP : $87.53
    Total Monthly : $1,171.88
    USDA

    Home Value : $194,500
    Length 30 Years
    Down Payment (0 %) : $0
    Amount Financed : $198,390
    Interest Rate : 5.75%
    Actual APR 5.93%
    Origination Fees (1 %) : $1,983.90
    Total Closing Costs $3,912.90
    Monthly Breakdown
    Principal & Interest : $1,157.75
    PMI / MIP : $90.93
    Total Monthly : $1,248.68
    5/1 FHA ARM

    Home Value : $194,500
    Length 30 Years
    Down Payment (3.5 %) : $6,807.50
    Amount Financed : $190,977.12
    Interest Rate : 4.625%
    Actual APR 4.80%
    Origination Fees (1 %) : $1,909.77
    Total Closing Costs $3,838.77
    Monthly Breakdown
    Principal & Interest : $981.89
    PMI / MIP : $87.53
    Total Monthly : $1,069.42

    Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 9 years ago

    Great post, both visually and content-wise.

    Posted by Elva Branson-Lee, CDPE - Atlanta Real Estate & Short Sale Agent (Solid Source Realty GA) over 9 years ago

    That's funny. A good friend of mine today just sent me a text saying that she is looking to purchase a house for $175,000 and she doesnt want the property taxes to be more than 3600. I thought I share that because this blog is about Property tax knowledge. Thanks for sharing this Mike.

    Posted by Lanre-"THE REAL ESTATE FARMER" Folayan, I don't make promises.I deliver results.SOLD HOMES (Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC) over 9 years ago

    Mike,

    That is unusual but in today's real estate market environment it can happen. Similar situations arise here in Vegas where property values have dropped a bunch and taxes haven't been adjusted yet.

    Posted by Esko Kiuru over 9 years ago

    That's what the buyers expect us to know about things like the taxes and the other costs that might affect the payment.

    Posted by Terry & Bonnie Westbrook, Westbrook Realty - Grand Rapids Forest Hills MI Re (Westbrook Realty Broker-Owner) over 9 years ago

    Mike - taxes are kiling more than house sales ... Property taxes have been know to be the straw that broke the camels back, so to speak, causing manufacturing business to pick up and move out of the country

    Posted by Kathy Clulow, Trusted For Experience - Respected For Results (RE/MAX All-Stars Realty Inc. Brokerage) over 9 years ago

    All,

    Thank you for your spirited comments!  I just got home at 10 pm, and I appreciate your comments.  #34, please note that uninvited links that don't contribute to the commentary are considered spam on Active Rain.

    Mike in Tucson

    Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

    Holy Cow!  LOL!  She's not from around here, is she? 

    I think taxes will be the big issue in the upcoming state elections. 

     

    Posted by Doreen McPherson, Phoenix Arizona Real Estate ~ (Homesmart ~ Scottsdale ~ Tempe) over 9 years ago

    After reading the comments, I end up forgetting what I wanted to say.  Then it pops back to the top.

    So, those cows are eating grass grown on mine tailings.  I don't think I'll look at steak the same ever again...

    Posted by Doreen McPherson, Phoenix Arizona Real Estate ~ (Homesmart ~ Scottsdale ~ Tempe) over 9 years ago

    Mike - indeed, knowing about the taxes can  make or break a sale! great post!

    Posted by Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional, Palm Harbor, Dunedin, Clearwater, Safety Harbor (Charles Rutenberg Realty) over 9 years ago

    Mike, I have this thing for cows - Hindu prosperity symbols or something like that.  Love the photos.

    Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) over 9 years ago

    Patricia,

    I've worked cows each year in Oklahoma for the past 14 years, and I like 'em too.

    BarbaraJo,

    You're everywhere on my blog this evening.  Thanks!

    Doreen,

    The rancher brings in hay for the cattle; there's not much growing on that hillside.  Your steak is safe!

    Mike in Tucson

    Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

    Hi Mike, great post; something to think about or rather know about. I do enjoy the rain and your posts. Keep up the good work; it is appreciated.

    Posted by Teral McDowell (Referral Patners LLC) over 9 years ago

    This blog does not allow anonymous comments