North and South Carolina have long been rivals.
Sports teams. Job markets. Tourism. All have been battlefields for the two states.
In the real estate industry, there’s yet another way the two states are compared: property tax rates.
For the most part, South Carolina is the winner when it comes to having a lower rate. That would seem to make it easier for Charlotte-area real estate agents to sell property in South Carolina, especially in these days of consumers trying to pinch pennies.
It doesn’t, those in the real estate industry say.
“If somebody wants to live in South Carolina they will,” said Karla Knotts, co-owner of Knotts Builders in Clover, S.C. “And if they know they want to live in the city of Charlotte, they will. We have never had anyone say to us that they’re going to buy a home in Clover because they’re saving this much tax money.”
The quality of schools and proximity to jobs are more determining factors than property taxes, she said.
Still, that doesn’t stop her or others trying to sell homes from pointing out the difference in the states’ property tax rates.
“People can save hundreds, sometimes thousands, of dollars a year,” Knotts said. “But a lot of people aren’t really aware of the difference.”
The rates are calculated differently in each state, which could make comparing them cumbersome for some buyers.
“It isn’t just a question of who has higher or lower rates,” Knotts said. “It is the way they charge you.”
In most North Carolina counties, including Mecklenburg and those around it, property taxes are computed using a formula based on every $100 of a property’s value. But in South Carolina, they are based on 4 percent of a property’s value.
“That difference in calculation can be a big deal,” said James Traynor, president of Clear Springs Development, the company that started the Baxter Village project in Fort Mill, S.C. “The last time I checked, York County taxes on an owner-occupied, single-family home were about half that of Charlotte.”
Data from Mecklenburg’s and York County’s tax assessors show the owner of a $140,000 Charlotte home would pay $1,755 in property taxes a year, while the same home in unincorporated York County would face $860 a year, a difference of 104 percent. Inside the city limits of Clover – also in York County – the owner of a $140,000 home would pay $1,232, a difference of 42 percent from what the Charlotte homeowner would pay.
But Traynor said he has yet to have a homebuyer tell him the difference in property taxes was the sole reason they decided to live in South Carolina.
Commercial real estate decisions are similarly impacted. But, according to Knotts and Traynor, also similarly don’t boil down to this one issue.
Traynor pointed to Baxter Village – considered by many to be the poster child of mixed-used developments in York County – as an example of a project where businesses and homeowners take other factors into consideration when making a purchasing decision.
The 1,033-acre development is one part subdivision, one part commercial park – and all parts popular, at least from an occupancy standpoint.
“The Town Center (shopping) area is what a lot of folks know us for, but we have right at 1,200 families living in Baxter Village,” Traynor said. “At build-out we’ll have about 1,450 families.”
Still, he admits the interest in Baxter Village is not what it was in 2006, and he and his staff emphasize the tax savings as often as they can when trying to drum up interest from commercial clients.
“Most folks know about the difference in property tax rates,” Traynor said. “But we talk about it and especially talk about it if they are from out of state.”
For Knotts, the tax rate on the commercial side is an important topic for would-be Clover landlords.
“If you’re going to invest in rental property I always make sure people know that the taxes will be different if you live outside South Carolina and are the landlord,” Knotts said.
York County’s tax assessor shows the property tax rate for a nonowner-occupied property in Clover owned by an out-of-state landlord would be calculated at 0.259 multiplied by 6 percent of the property value instead of the 4 percent of property value used for owner-occupied properties. An out-of-state landlord of a $140,000 home for rent in Clover would pay $1,848 per year in property taxes.
Mecklenburg County and the other counties in the Charlotte region do not have different tax calculations for properties owned by out-of-state investors.
When it comes to potential homeowners looking to move their family to a new location, Traynor said the tax break was nice. But he stopped short of saying it was the ultimate arbiter.
“I’m sure some folks have looked at one part of the area around Charlotte and then decided to choose Fort Mill because of the tax break,” Traynor said. “But it is much more common for people to choose Fort Mill because of the quality schools or lifestyle.”
Traynor highlights Fort Mill’s “small-town atmosphere” while pointing to the city’s closeness to Charlotte as a positive for families.
“That city is the economic engine that drives this area, and we are about 16 miles from the square,” he said. “We are close to the (Charlotte-Douglas International) Airport as well.”
Knotts said she knew a few clients who had bought their home in South Carolina but enjoyed being able to drive into the city when they wanted.
“With some homebuyers, I know why they are living in Clover as opposed to North Carolina,” she said. “Retirees have fixed incomes and I know of two retired ladies who wanted a stable outflow. For them $45 (less in taxes each) month is a significant savings.”
Baughman can be reached at [email protected].