Should we expect a tax reassessment after purchase?

Thanks for the additional input guys. I really appreciate it. For what it’s worth for anyone else who might come across this thread: Our broker and our banker got back to us and both basically said the same thing that snowman2 and daveinbedstuy said.

jakester

in Taxes 9 years and 7 months ago

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jakester | 9 years and 7 months ago

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We’re in the process of purchasing a 2 family home in bed-stuy. The property has been paying very low taxes (even by Brooklyn standards). I’m curious if we should anticipate a re-assessment/significant change in taxes after purchase. Our purchase price will be well above the last time the property changed hands and a good deal of work has been recently done to the house, which I assume was permitted/registered with the DOB (I should have more info on that soon). Poking around these forums some say that a change in the C of O is the major event that would trigger a reassessment.. Not sure whether I should anticipate that the recent renovations or the (hopefully) pending sale would also trigger a major re-assesment. I’ve also read about the max 6% / 20% over 5 years rule, but I’m assuming that wouldn’t apply here due to the renovations, and possibly also because of the change in ownership. I’ve thrown this question out to the professionals I’m working with, but haven’t been able to get a definitive answer, and I figured that there would be some wisdom here as well. Thanks guys!

daveinbedstuy | 9 years and 7 months ago

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No.

beeklyn | 9 years and 7 months ago

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We did an interior renovation in 2012 (cosmetic, new kitchen in same location, moved a few walls but no new room count) and this year we got notice that our property taxes tripled…

daveinbedstuy | 9 years and 7 months ago

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Sorry, somehow I missed the part about the renovations. If they were permitted (check the NYC BIS site) then, yes, you will be reassessed up.

resident2 | 9 years and 7 months ago

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Sales do not get huge increases, it will probably wake up the Dept of Finance to give you an increase of as you say the 6%. But the renovation, depending on how the building permits were filed will trigger a reassessment. If any extensions were added, a large increase, if the number of estimated cost of minor alterations was low, it will be “low”. The reassessment for alterations and improvements cannot be challenged, so your “professionals” should be able to give you answers on this up front. This is an estimated expense that you need to know upfront. I think we are going to see many buyers of flipped renovations having issues a couple of years down the road, I am really surprised how many buyers attorneys do not raise this question to sellers attorneys as part of their due diligence. Brokers should also know this, but brokers are not what they used to be. (Real Estate Professionals)

jakester | 9 years and 7 months ago

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Thank you guys, this is super helpful. I just checked through the BIS site, and yes the renovations were permitted. Unfortunately, the folks we are working with haven’t shed any further light on the issue, but I will keep pushing. Just trying to get a very ballpark potential figure, I tracked down the most recent quarterly tax bill for the property. Our purchase price is going to be about 2.5x the current estimated market value. Based on that, I am figuring that on the highest side, we would anticipate property taxes to be 2.5x what they currently are. Does that seem like reasonable logic? One item that I don’t understand is the market value vs Billable assessed value. The billable assessed value is about 2 percent of the estimated market value. Would that be subject to change due to the renovations? Thanks again guys.

snowman2 | 9 years and 7 months ago

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The 5 year rule applies to you; it is not specific to the owner. It is highly unlikely that renovations of any kind will trigger a reassessment of a 2 family house. While the city is allowed to reassess they have an unwritten policy not to do it for 2 family. I built a 2 story addition – all legal – to a 2 family 10 years ago without reassessment. Extensive renovation of a 4 family is what will get you reassessed for sure and for big numbers. Not sure about 3 family.

daveinbedstuy | 9 years and 7 months ago

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I have also heard what snowman2 said. But your taxes will go up ~6% or so every year anyway.