It’s been an interesting year for New Jersey real estate. Retail and office markets are hard hit by lockdowns and the introduction and ongoing appeal of remote work, and warehouse is the big winner with asking rents at an all time high. What about the residential market for first time homebuyers, or those with newfound freedom to move farther from a workplace? In a word: crazy.
In prime areas, homes hitting the market are snapped up in days or even hours. Bidding wars are common if not the rule, and sellers have almost unilateral bargaining power in negotiating key contract provisions, such as home inspection, mortgage and appraisal contingencies.
How does this translate into a property tax problem? Under normal circumstances, the sale of real property can’t be the sole basis to trigger an assessment increase in New Jersey. That’s good news when prices are inflated due to bidding wars and high demand, but there’s a catch.
Often, if a seller has made significant updates to the home, or if the property in question is a “flip”, or a home purchased and renovated within the last few years, the tax assessor has the freedom to increase the assessment on the basis of the improvements and not run afoul of the prohibition on sale-related increases. Even if there’s a long lapse in time between the improvements and the sale, many assessors will still increase the assessment after the sale.
As a result, many homebuyers may see surprising increases in their property tax burden next year or even added assessments. Unfortunately, when the sale price of the property is at or above the new assessment, chances of obtaining tax relief by way of assessment appeal are not clear cut.
The best plan is to get informed during the buying process and budget/buy accordingly. If you are looking to buy, we can help you to determine if an assessment increase is a possibility for the home you’re considering. If you see or have seen a tax increase after your purchase already, you can contact us for a complimentary evaluation of your situation.