Stonegate: buyer questions

[Goriot]

Where is there "elevation" in Stonegate?

Haha you are so right.  I think there is some Elevation at Arcadia though.  It's up there overlooking the rest of Stonegate.

I think they charged me $5,000 to put extra 5 inches of dirt over the ground.  They get ya

Goriot - are you getting any other upgrades besides to the elevation upgrade?

Hi! LOL elevation was not a upgrade.  It was a mandatory charge for that particular lot.  Yes, I added the conservatory room and front sink and will be adding bunch of other stuff that are part of the fixtures and building (different tone paint, etc.) when I visit the Design Center next month.  Other upgrades (i.e. walk in closet, garage organizer, etc.), I will get it from a secondary contractors so that I don't have to pay taxes on those every year.

 

[irvinehomeowner]

I have a rather stupid/random question? What is FCB? Fancy Chinese Bros? Fobby Chinese Buyers?  :

LOL...Full Cash Buyers.  But the other two also fit.

Actually... my original definition was Foreign Cash Buyer.

 

[irvinehomeowner]

Oh... and yes... I know what was meant by "elevation"... I was making a joke.

I can understand charging more for an elevation with a balcony... but if it's just for a different style... that's doodoo.

 

[eyephone]

Where is there "elevation" in Stonegate?

Haha you are so right.  I think there is some Elevation at Arcadia though.  It's up there overlooking the rest of Stonegate.

I think they charged me $5,000 to put extra 5 inches of dirt over the ground.  They get ya

Goriot - are you getting any other upgrades besides to the elevation upgrade?

Hi! LOL elevation was not a upgrade.  It was a mandatory charge for that particular lot.  Yes, I added the conservatory room and front sink and will be adding bunch of other stuff that are part of the fixtures and building (different tone paint, etc.) when I visit the Design Center next month.  Other upgrades (i.e. walk in closet, garage organizer, etc.), I will get it from a secondary contractors so that I don't have to pay taxes on those every year.

Sweet!

 

[Bennyboy]

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

 

[OCgirl]

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

 

[irvinehomeowner]

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

Who told you this? This is very misleading... you should talk to your CPA.

And I would have a talk with the sales office if they are telling you this.

From what I recall, your property tax basis on new homes is established by the selling price, and the selling price will include the cost of upgrades. If the county never lowers your assessment, you will be paying property taxes on those upgrades for as long as you own the home.

 

[OCgirl]

Actually, it's fair to assess it on the value of the house, which is base price + upgrade. The distinction between base price and upgrades is somewhat arbitrary.  What would happen if they would assess it on the base price only? Builders could do you a favor and set base price to zero and charge all on mandatory upgrades, meaning zero property tax!

And yes, you pay taxes for base + upgrades every year.

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

That sucks. What incentifies people to get their upgrades from the builder then? Convenience?
Does property tax go up every year if your home value goes up? Or does it stay the same?

 

[usctrojancpa]

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

Whether you buy a NEW or RE-SALE home, the property tax bill is based upon the recorded sales price.  I'm not sure how that is unfair, it would be unfair if your property tax was based upon the base price of the new home.  One of the reasons I recommend to my buyers to do upgrades after closing is that sales price will be lower which will result in a lower property tax bill, but you will have to come out of pocket 100% to do the upgrades after closing versus financing them through your loan.  At the end of the day, it is only 1% x the cost of the upgrades per year. 

 

[usctrojancpa]

Actually, it's fair to assess it on the value of the house, which is base price + upgrade. The distinction between base price and upgrades is somewhat arbitrary.  What would happen if they would assess it on the base price only? Builders could do you a favor and set base price to zero and charge all on mandatory upgrades, meaning zero property tax!

And yes, you pay taxes for base + upgrades every year.

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

However, your purchase price establishes the BASE assessment which is important in terms of Property 13.  For example, if you buy a property for $500k and then the County assesses your property at $450k in your year 2 then you pay property tax based upon a $450k value (your BASE assessment goes up to $510k in year 2...$500k *1.02 (2% annual increase limit)).  Let's say in year 4 the County now assess your property at $550k then you you pay property based upon $530.6k and not $550k ($500k base x 1.02 x 1.02 x 1.02).

 

[usctrojancpa]

Actually, it's fair to assess it on the value of the house, which is base price + upgrade. The distinction between base price and upgrades is somewhat arbitrary.  What would happen if they would assess it on the base price only? Builders could do you a favor and set base price to zero and charge all on mandatory upgrades, meaning zero property tax!

And yes, you pay taxes for base + upgrades every year.

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

That sucks. What incentifies people to get their upgrades from the builder then? Convenience?
Does property tax go up every year if your home value goes up? Or does it stay the same?

Convenience and the ability to finance them versus paying 100% out of pocket after you close.  Property taxes are based upon the County assessment after the first year but at capped at a 2% increase per year over your purchase price, as I mentioned above.

 

[usctrojancpa]

Whatever your recorded sales price (which includes builder upgrades) is your BASE value. 

Yes, but what you and the powers that collect tax call BASE, I call base+upgrades.

Actually, it's fair to assess it on the value of the house, which is base price + upgrade. The distinction between base price and upgrades is somewhat arbitrary.  What would happen if they would assess it on the base price only? Builders could do you a favor and set base price to zero and charge all on mandatory upgrades, meaning zero property tax!

And yes, you pay taxes for base + upgrades every year.

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

However, your purchase price establishes the BASE assessment which is important in terms of Property 13.  For example, if you buy a property for $500k and then the County assesses your property at $450k in your year 2 then you pay property tax based upon a $450k value (your BASE assessment goes up to $510k in year 2...$500k *1.02 (2% annual increase limit)).  Let's say in year 4 the County now assess your property at $550k then you you pay property based upon $530.6k and not $550k ($500k base x 1.02 x 1.02 x 1.02).

 

[Goriot]

Actually, it's fair to assess it on the value of the house, which is base price + upgrade. The distinction between base price and upgrades is somewhat arbitrary.  What would happen if they would assess it on the base price only? Builders could do you a favor and set base price to zero and charge all on mandatory upgrades, meaning zero property tax!

And yes, you pay taxes for base + upgrades every year.

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

That sucks. What incentifies people to get their upgrades from the builder then? Convenience?
Does property tax go up every year if your home value goes up? Or does it stay the same?

Convenience and the ability to finance them versus paying 100% out of pocket after you close.  Property taxes are based upon the County assessment after the first year but at capped at a 2% increase per year over your purchase price, as I mentioned above.

Correct me if I am wrong, but I don't think you are paying 100% out of pocket.  For example,  If you have $150,000 downpayment available on a $500,000 base price + $50,000 planned upgrade.  You can make $100,000 down and get $400,000 loan (assuming you didn't max out on your debt) and use remaining $50,000 cash to pay for upgrade with a secondary contractor.  This would be same as putting $150,000 and getting a $400,000 loan to buy a new home with $50,000 upgrade for a total of $550,000.  It's just matter of planning and doing your numbers.

 

[usctrojancpa]

Actually, it's fair to assess it on the value of the house, which is base price + upgrade. The distinction between base price and upgrades is somewhat arbitrary.  What would happen if they would assess it on the base price only? Builders could do you a favor and set base price to zero and charge all on mandatory upgrades, meaning zero property tax!

And yes, you pay taxes for base + upgrades every year.

From my understanding I believe you would only pay taxes on those upgrades during the first year. Just an FYI.

But I think you're on the right track as the homebuilders always overcharge for their upgrades. I get all this talk about comparing apples to oranges (warantees etc, for some items its worth it, for others not so much)

Okay I am assuming we are talking about property tax. We have to pay tax on the upgrades?!?? Isn't it fair that tax is only assessed on the base price?

That sucks. What incentifies people to get their upgrades from the builder then? Convenience?
Does property tax go up every year if your home value goes up? Or does it stay the same?

Convenience and the ability to finance them versus paying 100% out of pocket after you close.  Property taxes are based upon the County assessment after the first year but at capped at a 2% increase per year over your purchase price, as I mentioned above.

Correct me if I am wrong, but I don't think you are paying 100% out of pocket.  For example,  If you have $150,000 downpayment available on a $500,000 base price + $50,000 planned upgrade.  You can make $100,000 down and get $400,000 loan (assuming you didn't max out on your debt) and use remaining $50,000 cash to pay for upgrade with a secondary contractor.  This would be same as putting $150,000 and getting a $400,000 loan to buy a new home with $50,000 upgrade for a total of $550,000.  It's just matter of planning and doing your numbers.

Yeah but if the sales price (and lender appraisal) is $550,000 with the builder upgrades then you'll be able to get a loan of $440,000 (20% of $550,000).  So you end up being able to finance $40,000 or 80% of the builder upgrades (or whatever the allowable lender LTV/loan amount is) of the upgrades versus paying $50,000 out of pocket after you close.  The fact of the matter is that builders mark up their upgrades from like 30% to 300% so the owner will be able to do those same upgrades after closing for closer to $25,000-$30,000 instead of $50,000.

 

[test]

base = land + improvements

Says so right there on the tax bill.

 

[usctrojancpa]

base = land + improvements

Says so right there on the tax bill.

Yeah, but the base will always equal the purchase price in the first year (unless it's not an arm's length transaction).  The County then takes that base and breaks it up into land and improvements.

 

[OCgirl]

What I meant by fair is so if one seller chooses to do all upgrades through the developers (say $100k). That seller will have to pay tax on that 100k for however long the seller chooses to keep the house. Another seller chooses to do all upgrades through a third party contracter. That seller doesn't need to pay tax on any of the upgrades. Everything else equal those two houses are equal in value (from an appraisal standpoint).

This is just coming from someone who has no idea how property tax works.

 

[usctrojancpa]

What I meant by fair is so if one seller chooses to do all upgrades through the developers (say $100k). That seller will have to pay tax on that 100k for however long the seller chooses to keep the house. Another seller chooses to do all upgrades through a third party contracter. That seller doesn't need to pay tax on any of the upgrades. Everything else equal those two houses are equal in value (from an appraisal standpoint).

This is just coming from someone who has no idea how property tax works.

In that sense, yes it is kind of unfair.  But remember that owner who does the upgrades after they close has to pay for the upgrades 100% out of pocket where the owner who gets them through the builder can finance most of them (if they are using a loan to purchase a home).  At the end of the day, we are talking about $100/year or $8/month difference in the property tax (that's assuming you are phased out of the property tax deduction on your taxes) which isn't even a rounding error in terms of the expenses of owning a home. 

 

[irvinerealtor]

 

[OCgirl]

What I meant by fair is so if one seller chooses to do all upgrades through the developers (say $100k). That seller will have to pay tax on that 100k for however long the seller chooses to keep the house. Another seller chooses to do all upgrades through a third party contracter. That seller doesn't need to pay tax on any of the upgrades. Everything else equal those two houses are equal in value (from an appraisal standpoint).

This is just coming from someone who has no idea how property tax works.

In that sense, yes it is kind of unfair.  But remember that owner who does the upgrades after they close has to pay for the upgrades 100% out of pocket where the owner who gets them through the builder can finance most of them (if they are using a loan to purchase a home).  At the end of the day, we are talking about $100/year or $8/month difference in the property tax (that's assuming you are phased out of the property tax deduction on your taxes) which isn't even a rounding error in terms of the expenses of owning a home.

At what point do you start phasing out on your property tax deduction?