Home market braces for tax hike
"At some point, it makes no sense financially to live there," he said. "You just think, 'Why am I doing this?' "
indystar.com
Negotiations key on who will pay bill for impending increases, real estate agents say.
By Matthew Tully
matthew.tully@indystar.com
June 16, 2003
Home buyers and sellers in older neighborhoods, get ready.
Tax bills reflecting the state's new property tax assessment system should begin showing up in Marion County mailboxes later this month. Real estate agents say the results could hurt, at least temporarily, the popularity of some of the city's most desirable neighborhoods.
That's because property taxes will be tied more closely to the market value of homes for the first time.
Older homes in such neighborhoods as Broad Ripple, Butler-Tarkington, Irvington, Lockerbie Square and Meridian-Kessler have long benefited from a system that reduced taxes as homes aged. But in 1998, the Indiana Supreme Court ruled that assessment system unconstitutional.
The result: higher tax bills on many older homes and less spending power for buyers. Realtors said the looming bills already are changing the way people purchase homes, with some buyers demanding that sellers pay the upcoming tax bills while others include escape clauses.
For instance, a potential buyer of a Broad Ripple home demanded a guarantee that he could back out of the purchase if taxes got too high, said Sue Applegate-Harting, a RE/MAX real estate agent who works in Washington Township, where many older homes are located. It will let him cancel the sale if the home's taxes jump from about $800 to more than $2,000 annually.
"This may be something that affects where people choose to live," Applegate-Harting said.
The county halted the process of mailing bills last week because of a state foul-up in the way a key tax credit was calculated; it expects to begin mailing revised bills this week. The fix will lower overall tax bills in Marion County by an average of $57 annually, but that is just a drop in the bucket for those whose tax bills are skyrocketing.
Realtors say the changes will bring fairness to the state's property tax system. But it also will eliminate what has been a financial benefit to owning older homes.
Until now, taxes on a $150,000 home built in 1940 were much lower than an identically valued home built in 1990.
Those two homes now likely will have similar tax bills.
For example, two homes currently on the market for $124,900 -- one built in 1998 and the other in 1907 -- will face tax bills this year of roughly $1,402 and $1,495, respectively.
Last year, however, the older home, which is in Center Township, was taxed at only $386 -- $1,000 less than the newer dwelling, which is in Pike Township.
The new bills are coming out as Angela Fritz tries to sell her three-bedroom Butler-Tarkington home. Until now, the home's relatively low property taxes -- about $657 a year -- have been a huge selling point.
Taxes are increasing by about $900 a year on the home, which is priced at $189,900, but Fritz says it only makes sense to move to a fair tax system. And she is not worried the increase will hurt sales in her popular Northside neighborhood. Even as the area prepares for the new tax bills, she said, traffic from potential buyers has been heavy.
"There's always a good amount of interest (for Butler-Tarkington homes)," she said.
F.C. Tucker agent Colleen Clifford said that while some people might decide to sell their older homes, the annual tax bill isn't likely to keep buyers away for long.
"It will be kind of a blip on the screen because people do adjust," Clifford said. "With taxes, they are what they are."
She said that's especially true for those paying between $200,000 and $500,000 for a home.
"It's not likely to keep them from moving into the house they want," she said.
Last week, as Clifford showed a small Broad Ripple bungalow to Carmel apartment-dweller Rachel McDuffee, there was some proof that older neighborhoods will retain their status.
With residential property taxes rising in Broad Ripple, the annual bill on the $137,500 home will more than double -- from $1,020 to about $2,100. Although McDuffee found the home a little small, she wasn't turned off by the increasing taxes. The character of the neighborhood will keep her looking for a home there.
"I've lived on just about every side of the city," she said. "Broad Ripple has a different kind of heartbeat."
About 200 miles south, property owners in Evansville were among the first in the state to receive their new tax bills earlier this spring.
Particularly hard-hit has been the city's Downtown Preservation District, which is filled with large, older homes that have been renovated during the past 15 years, said John Pickens, an Evansville real estate agent.
In April, Jim Keck moved into one of those homes -- a 3,600-square-foot Mediterranean-style house built in 1922. The annual property taxes on the $296,000 home rose from $800 to $4,300.
Already faced with the high heating and maintenance bills that come with some older homes, Keck is on the verge of selling his house.
"At some point, it makes no sense financially to live there," he said. "You just think, 'Why am I doing this?' |
