Real Estate Marketing & Beyond
With home values rising fast, experts warn that homeowners might want to brace themselves for a significant bump in the property tax bills.
The magnitude and timing of those tax increases will vary though, because while some states may see rises of several hundred dollars, others such as California and Texas imposes limits on year-over-year increases.
“An increase in value does not necessarily mean that the next year’s property taxes will increase at a proportionate rate,” said Lee Pierce, senior vice president of lending for Seattle Credit Union, in an interview with NerdWallet.
Data from the National Association of Realtors shows existing-home prices rose by an average of 13.3% in September compared to the year before.
That’s a steep increase, and it means that even in states that try to shield homeowners from hefty property tax rises, people can expect to see higher bills. NerdWallet reports that 18 states, plus the District of Columbia, limit how much property tax assessments can rise per year. Those caps vary, with California limiting increases to just 2% per year, while Texas allows increases of up to 10%.
Homeowners that pay their property taxes via an escrow account on a mortgage will receive an escrow account disclosure from their loan servicer early each year, NerdWallet explained. That statement will show the expected annual cost of property taxes, homeowners insurance and mortgage insurance, if applicable. If the servicer is unable to cover the tax bill from an existing escrow account, the homeowner will have to pay the difference.
Homeowners can instruct their lenders to withhold more each month in their escrow account to avoid potential shortfalls if they believe their property taxes are likely to rise.
