Property Taxes Hardly Affected By Decline in Home Prices
The sudden freefall in property values took many homeowners by surprise. Nevertheless, they remained comforted by the assumption that this devaluation would have the advantage of lowering property taxes. Unfortunately, this did not hold true in many cases.
To the surprise and disappointment of a number of homeowners, property taxes have not only failed to decline, but for some, there has even been an increase. This has been the root of confusion among homeowners struggling to fathom the justification for paying more taxes on homes which have devalued since the previous year.
The reasoning behind this disproportion of property values and taxes lies in the complex tax calculations which exist for many areas. In Nevada, for instance, one major problem is the capping of property tax increases which had occured during the time of the housing boom when property values skyrocketed rapidly. The values of these same houses are now falling, but unfortunately, this decrease is not yet enough to offset the increases which had previously taken place. Property values would, therefore, need to undergo a rapid and significant decline so as to allow for the decline in property tax bills.
With the continuing increase in the rates of foreclosures and defaulted loans in many areas, quite a number of counties have begun to see a concurrent increase in the rate of property taxes which go unpaid. Detroit's metro area, in particular, has reached a never before seen height in therate of property taxes which have not been paid. Based on the increase in foreclosures and declinging housing values, Detroit is now considered as being one of the absolute worst housing markets throughout the United States. The weakened economy and lack of employment opportunities are also considered to have contributed to Detroit's current housing crash.
Failure to pay property taxes for a period of three or more consecutive years may result in foreclosure, even for property owners who consistently pay their monthly mortgage on schedule. In these cases, the county would gain control of these properties which they would proceed to auction so as to acquire the funds to pay off the balance of owed taxes. Counties within the Detroit area now struggle to recover hundreds of millions of unpaid property tax dollars. These counties have suffered significant repercussions as a result of this situation.
Nevertheless, all is not lost for homeowners who have found themselves behind in their property tax payments. Foreclosure can be avoided by following certain steps, the first of which is to simply begin paying the taxes. It is a common mistake among homeowners to assume a defeatist attitude if they are unable to pay off the owed taxes, which results in them making no payments at all. It should, instead, be noted that making whatever payments are possible is far better than to pay nothing whatsoever. It would be good to begin by paying off older taxes first since three consecutive years of non-payment creates the risk of foreclosure.
In some cases, a tax exemption may be granted to homeowners who sufficiently demostrate circumstances of extreme hardship. You should, therefore, contact your county's treasurer to find out if you are elligible for property tax exemption or an extension to to settle your unpaid taxes. This should be done as soon as possible to ensure that you meet the application deadlines.
It would also be prudent to find out from your bank or mortgage company whether or not they offer any loans or other programs which may provide monetary aide so that you may pay off your taxes. Banks are often very willing to assist homeowners to avoid foreclosure since it is not in their best interest for the county to seize the property. Note, however, that gaining such assistance will put you in further debt.