Q: I bought a property for back taxes that were owed. Do I pay property taxes on just that amount (the amount of the back taxes) or do I have to pay on the appraised value of the whole house?
A: You raise an interesting point. In some parts of the country, property taxes are set on the basis of the purchase price for a home. While in other parts of the country, local assessors may use a complicated formula for determining the value of a home.
In your case, depending on the local laws, the assessor’s office or tax office may not consider your purchase of the property in a tax sale as a true sale and may still tax the home on the basis of the home’s value in the neighborhood.
Because tax rules are so local and so specific, you really should contact your local tax assessor’s office or tax collector’s office to determine how that office taxes properties that are purchased in tax sales.
With more properties in trouble, and lost due to foreclosure sales or real estate tax sales, local governments will need to seek out new sources of revenue. Some assessor or tax offices may be less willing to acknowledge that property values have decreased in your area and may attempt to use and maintain the existing assessed value on the home.
In some areas of the country there are people who specialize in tax protests and fighting your property taxes. If you are unable to get clarification on how your real estate taxes are computed, you may decide to seek some professional help. Keep in mind that many of these professionals charge on the basis of the percentage they save you and that you wouldn’t be out of pocket money unless they obtain a savings for you during the course of fighting your property taxes.
By the way, I hope you can afford not only the payment of future real estate taxes on the property, but also the other costs of owning and maintaining this property. It seems to me that the tax bill is just one piece of information you did or should have considered before buying the property.
You might also want to read this article on Fighting Property Taxes When House Values Drop.