Buying a home is a big decision, and the process is oftentimes marred by uncertainties. It’s a decision that requires months or even years of planning. There are so many things to factor in, which is miscalculated, and judgments are made with haste, things can get out of hand. You’ll also be dealing with realtors, some of whom have not a shred of decency or goodwill.
There are, of course, some good realtors out there, but it’s like they all swore an oath of secrecy. In other words, there are things that realtors will never disclose to you, and if you’re not careful, you may end up paying more than you bargained for. This is especially the case when it comes to real estate taxes. To bring such undisclosed and classified information into the open, below are hidden real estate taxes realtors don’t want you to know.
1. The Triple Net Taxes (NNN)
The triple net taxes or what’s commonly referred to as NNN are taxes imposed on the leased or rental properties, along with property insurance and maintenance fees. When dealing with such properties, your realtor must be forthcoming in making you aware of such expenses. This is especially important because such expenses will be with you throughout your tenancy period.
Being the lessee, you’ll need to part with the ongoing expenses of maintaining the property till the day you cancel your contract with your landlord. Other expenses relating to triple net taxes include building insurance and property taxes. Now, as a tenant, it’s essential to find out how such expenses are calculated and how they can affect your tenure in case you miss out on payments. But the thing with NNN taxes is that they are calculated based on estimates. Always ensure that you have the right estimates before getting into any contract with your landlord.
2. Prepaid Property Taxes
The decision to buy a home, as earlier mentioned, is not an easy one. You need to be aware of all the expenses that come with homeownership, and this includes taxes. Your realtor may not disclose such taxes first-hand because, in most cases, what they care about most is selling you the house. Prepaid property taxes will inadvertently increase the overall amount of the house at closing. These taxes can easily add up to more than $1000 depending on your location, especially in places where real estate prices are higher. Always ensure you get the exact value before committing yourself.
3. Escrow Fees
After you’ve made your pick and decided on a house that’s right for you, you may be required to have your sum of money held in an escrow account. This is especially the case when buying a house in cash. Now, what realtors don’t tell you is that there are fees associated with keeping the money in an escrow account. This means that the sooner you close, the more convenient it will be from a financial perspective. You may also need to have some money held in the escrow account to take care of property taxes and insurance. You’ll, therefore, need to know how much you are charged for keeping such monies in the escrow account.
4. Real Estate Transfer Taxes/Deed Transfer Tax
These are the taxes associated with, as the name suggests, the transfer of real estate property. One thing to note is that these taxes will vary from one state to another. The Real Estate Transfer Tax can either be paid by the seller or the buyer. Depending on the agreement, they can also be split between the buyer and the seller. Before you enter any agreement, it’s best to ensure you are aware of what your state charges on transfer taxes.
There are, however, exceptions when it comes to deed transfer tax. These apply when deeds are transferred between spouses, children, or other family members. But for this to happen, you’ll need to know your state’s general guidelines on deed transfer tax. While it is an added expense, ensure that you know how much it will cost you and how it will affect the total cost of owning a house.
Finally, the above taxes may vary depending on your state. This is reason enough to be well informed regarding your state’s property laws. Navigating through taxes can oftentimes seem like a painstaking process, but you’ll be doing yourself a favor if you paid your taxes on time to avoid hefty penalties. Here’s the takeaway; always have your realtor come clean and explain to you how these taxes can affect your finances, as well as their impact on the overall cost of homeownership.