We all remember our parents or family members complaining about property taxes, so they should be no surprise in your home purchase. However, knowing what the taxes are or at least an approximation is a critical piece of information when buying a home. You do not want to get your first look at the tax amount three days before you close... when you receive your settlement statement from your title attorney and it outlines what you owe for taxes. It is important to know the tax amount you will be paying so you can factor that into your monthly expenses. Ultimately, you should have a ballpark amount prior to submitting your offer. Where can you get this? Your agent should have access, and if there is a greater need for clarity, you can reach out to your town tax assessor.

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Wait, what? I owe taxes at closing? Yes, you do. The reason is that taxes are paid two times a year in Maine and they are pro-rated, meaning that the owner pays in March and again in September for the next six months ahead. In the case of your mortgage, you can set up an escrow account that you pay monthly towards your taxes and your escrow account/company will pay them so they are off your mind.

 

Back to you paying the seller. So, let's say the seller has paid the next 6 months taxes and you are to close on the property in the middle of that time frame. The title company will review the taxes paid, divide it by the number of total days in that period and the multiply this by the number of days you will own the house in that period. It is fair, simple, and should not be a surprise to a buyer if your lender and agent have done their job! 

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Be prepared that Maine towns do not update their property tax information at closing. They update it once a year in April. So, if you purchased a house in May, you will not receive the tax bill in September, the sellers will. This is a common pain of the process, but as a new home owner you are on top of things and have the sellers contact info and reach out to them to make sure they pass it along to you. 

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Why are my taxes higher or lower than my friend in a different town?

Every town has its own tax rate, and this is based on the assessed value of properties and what the town municipal budget is. In short, the town has a desired amount of money to fund its operations and they tax properties to reach that desired amount. Yes, your property taxes pay for quite a bit; from schools to roads, from fire fighters to police officers.

 

Properties are assessed every 5-7 years. If the budget/need is higher than the taxes to be paid based on every property at its assessed value, the town increases the mill rate, and this increases each property's taxes. I would not assume that your taxes will remain where they are at. I would expect them to raise over the time you own the home, given that the market remains stable and you upkeep your home. 

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Yes, not the most fun thing to read but very important to understand.