Property Tax Disclosure ‘Calculator’ to be Revealed for Media on Wed., March 19
After April 1, Measure Requires Montgomery County Home Sellers to Tell Potential Buyers in Advance of
Estimated Tax Bill for First Year in the Purchased Home
ROCKVILLE, Md., March 18, 2008—On April 1, a law unanimously passed by the Montgomery County Council and signed by County Executive Isiah Leggett will go in effect requiring sellers of homes to provide a potential homebuyer with an estimate of what their actual property tax bill and other non-tax charges will be in the first full fiscal year after they purchase the home. The bill will eliminate the shock that many County homebuyers have endured in recent years when they learned that they will pay significantly higher property taxes than did the seller.
At 11:30 a.m. Wednesday, March 19, Councilmember Phil Andrews, primary sponsor of Bill 24-07, and Eric Friedman, director of the County’s Office of Consumer Protection, will hold a news conference to demonstrate the easy use of a “calculator” that home sellers, potential buyers or realtors can use to determine the approximate property tax and other non-tax charges that a new homeowner would pay on a property.
The news conference will be held in the sixth floor conference room of the Council Office Building at 100 Maryland Ave. in Rockville.
The calculator will be accessible through the County Web site at www.montgomerycountymd.gov/estimatedtax. By simply entering the address of a residence, the approximate tax obligation of a potential new homeowner will be available within seconds.
“It is crucial that homebuyers know what they will owe in property taxes before they put any money down so that they can make an informed decision about whether they can afford the house,” said Councilmember Andrews. “Most homebuyers are unaware that property tax bills are typically jumping thousands of dollars when a home changes ownership. I am pleased that Montgomery County is the first jurisdiction in Maryland to empower homebuyers with this important information.”
Andrews’ bill addresses a common problem in Montgomery County that has arisen during the era of swiftly rising residential property values. Although the State of Maryland re-assesses residential properties every three years, the taxable assessment on a specific property is capped at a 10 percent maximum increase per year, unless the home changes ownership. Under this scenario, although the assessed value of a home could increase by 70 percent or more, the annual property tax paid by the homeowner will not increase by more than 10 percent a year (unless property tax rates are increased). However, when the home is sold, the new owner will pay tax based on 100 percent of the taxable assessed value for that year, often resulting in a difference of thousands of dollars between what the former owner would have paid in property taxes and what the new owner must pay.
For example, a home on Mateny Hill Road in Germantown was advertised for sale in late 2007 for $565,000, with taxes listed at $2,049. However, someone purchasing the home would have faced a tax bill of $4,728 for Fiscal Year 2009, the first full tax year after they moved in, based on the home’s taxable assessment multiplied by current property tax rates. By contrast, if the house were not for sale, the current owners’ tax bill for FY09 would be $2,680, more than $2,000 less.
“A home buyer should receive the most accurate information possible when buying a home,” said County Executive Leggett. “This new law will ensure that these disclosures prevent purchasers from receiving information about property taxes that may not be correct. A user-friendly, estimated property tax calculator available online will help sellers comply with this law.”
Andrews, who said he hopes this bill becomes a model for counties statewide to adopt, said the situation is particularly trying for homebuyers who have calculated whether the home they want to buy is affordable based on their income.
The bill requires that home sellers include information on certain written or electronic material advertising the home (including on fliers at open houses) the approximate property taxes a new owner would owe in the first full tax year after they purchase the home. The estimate is based on all applicable property tax rates in force at the time the advertising material is produced. The information would not have to be included in small print ads, such as classified newspaper ads, or as part of certain Internet advertising.
The County’s Office of Consumer Protection will enforce the law. The Department of Technology Services worked to create the calculator.
The County law does not apply to the municipalities of Barnesville, Kensington, Poolesville or Rockville. However, those jurisdictions can adopt similar consumer protection measures regarding home sales within their borders.