Most homeowners select a renovation project that will enhance their lifestyle and increase the market value of their property. While researching this selection, it’s important to consider all costs.
One often-overlooked factor is the increasing property taxes that may result from the renovation. This was addressed in a special report from the National Association of Realtors.
“Homeowners tackling a remodeling project may want to consider how their renovations could impact what they pay on their taxes. Renovations can increase a home’s assessed value, and assessed value is used to determine the property tax owners pay,” the report stated.
“The improvements that can increase a property’s reassessment can vary considerably by location. Homeowners may be wise to ask their city in advance how a certain improvement might impact their home’s assessed value, if they want to avoid surprises later on.”
Generally, additions and increasing living space tend to increase an owner’s property taxes. Also, finishing space that the owner already has, such as in the attic, garage or basement, also tends to increase the property tax bill, the report noted.
“Anything that increases the square footage of the living space is likely to increase the value of the home, and therefore the assessed value,” says Tom Shaer, deputy assessor for communications with the Cook County Assessor’s Office.
“Also, large renovations – such as adding a bathroom – likely will prompt a reassessment of a home too. That’s because an additional bathroom allows more people to live in the house, therefore increasing its value,” says Pete Sepp, president of the National Taxpayers Union, a pro-taxpayer lobbying group.
Renovating a kitchen can be one gray area, says Michael Kapp, public information officer for the Los Angeles County assessor’s office.
“If they’re replacing countertops and not extending them, it would probably not [trigger a reassessment],” Kapp says. “If they add additional cabinets or move a wall, for example, that would trigger reassessment, even if the square footage does not increase.”
Q: Will the Federal Banks soon raise interest rates?
A: At this writing, the Fed is expected to start a series of increases in interest rates very soon. Here’s a quote from HSH Market Trends:
“It has been years since the Fed made any change to rates, and nearly 10 since the last time we saw an increase. Although the small initial change to rates is not that important by itself, it does take the first step on what is expected to be a long, gradual upward path which will probably end well short of long-term historic norms for rates.”
Q: Is it practical to give real estate as a Christmas gift?
A: It could be a great gift, or it might trigger a negative reaction within the family. Here’s part of an item carried in Realty Times:
“When unresolved family issues and ingrained family dynamics stand between you and your real estate goals, you won’t get far by pretending family influence doesn’t exist or by returning to old behavior patterns and squabbles.
“When giving a gift of real estate, the giver expects a happy ending for receivers, but within families, problems can arise. From the start of a gifting project, face relevant family issues and dynamics head on. Work to transform them in the context of current issues and constructive dynamics so you’ll enable achievement of the desired real estate outcome – the happy ending.”
Q: Are home sales still rising?
A: Yes, the increases are small but consistent. The Pending Home Sales Index inched up 0.2 percent to 107.7 in October from an upwardly revised 107.5 in September and is now 3.9 percent above October 2014 (103.7). The index has increased year-over-year for 14 consecutive months.
Lawrence Yun, National Association of Realtors’ chief economist, says, “Pending sales have plateaued this fall as buyers struggle to overcome a scant number of available homes for sale and prices that are rising too fast in some markets.
“Contract signings in October made the most strides in the Northeast, which hasn’t seen much of the drastic price appreciation and supply constraints that are occurring in other parts of the country,” he said. “In the most competitive metro areas – particularly those in the South and West – affordability concerns remain heightened as low inventory continues to drive up prices.”
WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.