Chicago property taxes - Posted by Javier Arroyo


#1

Posted by Andrew Smith (Phila) on October 19, 1998 at 15:43:56:

I would imagine that your assumption is correct in most places. Our assessors office is free to establish their own opinion of fair market value. However, it is also common for new construction sales to be assessed at their selling price in which case this buyers desire to make the stated selling price as low as possible makes perfect sense. Although I am not aware of the buyers finances the price of the home they want to buy would seem to indicate they are moving up. If they have a fair amount of equity from their former home so that they are putting down a substantial amount of money then the mortgage amount they can qualify for will not be heavily impacted by the sales price and they can afford to pay the Realtors commission and other closing costs for the seller out of pocket. Unless their sales price is enourmously outside the norm (which their adjusted sales price in this case would not seem to be) their strategy makes sense as it will not set off any alarms in the assessors office.


#2

Chicago property taxes - Posted by Javier Arroyo

Posted by Javier Arroyo on October 18, 1998 at 20:14:28:

My wife and I would like to purchase a home in Chicago. The taxes have not been assessed because the property is too new. Our real estate agent adviced us that the City of Chicago will assess a 2.0% property tax based on the selling price. We would like to offer $335,000 for the property (the asking price is $349,000). To reduce the tax liability we would offer to pay the seller’s closing costs and the broker’s commission to be able to pay taxes on approximately $317,000 ($335,000 - 6% broker’s commission).
I read you article about offering a “gift equity at closing”.
Can you advise us of any additional creative ways to reduce our property taxes?

Sincerely,

Javier Arroyo


#3

Re: Chicago property taxes - Posted by Javier Arroyo

Posted by Javier Arroyo on October 20, 1998 at 22:00:34:

The area where we are buying the property is Graceland West, 1400 West Cuyler. Any more insight or info? We also have our own agent, so we can’t negotiate their fees, or do you think we can?


#4

Re: Chicago property taxes - Posted by HankM

Posted by HankM on October 19, 1998 at 20:39:59:

I’m in Chi-town … at best you are 3 years away from re-assessment … maybe less, lower you offer by 1000 dollars to compensate and be done with it:) … BTW I think you could do better than that, the residential market is starting to turn, particularly at the top end … you didn’t mention your area, but 350K in the northwest sounds like Sauganash to me … make 'em come to you … unless of course you’ve fallen in love with the property … a distinct disadvantage:)

Hank


#5

Re: Chicago property taxes - Posted by JohnBoy

Posted by JohnBoy on October 19, 1998 at 10:54:25:

Why not just offer the $317k as your purchase price and let the seller pay their own closing and real estate commission? $317k on a listed price of $349k isn’t a very big discount in that price bracket. Let the realtor cut 3% off the commission to the seller to make the deal fly. That would save the seller over $10k right there. Is this the listing agent? If it is you shouldn’t have to much of a problem with getting the agent to go along with this. If you were to bring in your own agent then the commission would have to be split anyway. Why spend an extra $10k when you don’t have to?


#6

Re: Chicago property taxes - Posted by JPiper

Posted by JPiper on October 19, 1998 at 02:36:51:

You’re going to pay $18,000 to save $360?? Did I miss something?

JPiper


#7

Re: Did I miss something here? - Posted by Andrew Smith (Phila)

Posted by Andrew Smith (Phila) on October 19, 1998 at 05:21:03:

You missed that they would be reducing their offer by $18,000 and agreeing to pay the Realtors commission and closing costs. A zero cost strategy that makes a lot of sense if it will save them $360.00 per year. If the sellers will be leaving any appliances such as a refrigerator, window air conditioners, washer and dryer it would also make sense to assign the highest possible value to these items and to pay for them off the agreement rather than have them included thus further lowering your taxes. I think the original post said or implied that this was new construction so that probably will not apply here but in other areas of the country that strategy definetly works and makes a lot of sense.


#8

Re: Did I miss something here? - Posted by JPiper

Posted by JPiper on October 19, 1998 at 11:37:23:

Andrew:

I doubt if it’s going to work the way you envision in your “zero cost” strategy.

I can hear the phone call now. Mr. Lender, the seller and I have a price established of $335,000, so what we would like to do now is lower the price by $18K to $317,000, and then have you lend the $18,000 back to us so that we can pay the seller’s real estate commissions. So we will show a price on our settlement statement of $317,000, but you will be loaning to us based on the “real” price of $335,000. Mr. Lender, the reason we would like to do this is to save $360 per year in taxes.

I doubt it, but I’m certainly open to education on this. Then I wonder if the county assessor will be fooled by this. Let’s see Mr. Assessor, I only paid $317,000 for the house but my loan was based on $335,000.

In the event that the lender won’t go for this, paying $18,000 out of your pocket to earn $360 per year is a very poor idea. How about this? I’ll pay $720 per year for the same $18,000…anyone who would like to do this email me.

Anyway, I’m open to enlightment on this.

JPiper


#9

Re: Did I miss something here? - Posted by phil fernandez

Posted by phil fernandez on October 19, 1998 at 07:34:28:

Andrew,

You might have missed something here. Where’s the $18,000 going to come from to pay the real estate commission ? If you say from the mortgage loan, I doubt if the bank will go along with that. The bank’s lending on the house. But I could be wrong.Otherwise the $18,000 will be coming out of the buyers pocket and like Jim says $18,000 for $360 tax savings. It doesn’t make sense to me.


#10

Re: Did I miss something here? - Posted by Carol

Posted by Carol on October 19, 1998 at 07:04:55:

I guess things are done differently in different places. The sales price is one factor in assessing taxable value in our area, but only one. The property appraiser’s office is free to establish value, taking into account an overpriced or underpriced sale, and establish FMV based on comps. They have walked me through their process and they proceed pretty much like an appraiser.

But again, this ain’t Chicago!
Carol