Property taxes still a factor when buyers decide where to move

Thanks to recent state limits on how much towns can increase property taxes, the typical homeowners’ tax bill rose only 1.4 percent in Bergen and Passaic counties over the past year — much less than in the early and mid-2000s, when the median tax was jumping as much as 8 percent a year in Bergen. But property taxes in North Jersey are still among the highest in the nation and continue to have a powerful effect on a person’s decision about where to buy a home. Annual property taxes in Bergen County are now a median $9,300, and in Passaic, a median $8,742. In general, towns with higher-priced homes have higher taxes because the taxes are determined as a percentage of assessed value. "As taxes became higher and higher, they became more and more of a factor that buyers will look at," said Robert Abbott of Abbott & Caserta Realtors in Ho-Ho-Kus. Even in high-priced areas like northern Bergen County, affluent buyers will consider taxes when they’re picking a town, he said. Jaime and Greg Scerbo, parents of two who are now renting in Park Ridge, plan to focus their house hunt on Mahwah, where the median property tax bill of $6,525 is significantly lower than in surrounding towns because of the large number of corporate taxpayers who help pay for municipal services. The Scerbos want to keep their tax bill to $12,000 a year or less. "It’s only going to go up," said Jaime Scerbo, a teacher. "I’d prefer to spend a little more on the house and a little less on taxes." Her theory is that if they start with lower property taxes, they could withstand the inevitable increases. Randi Ungar, who currently lives on the Upper West Side of Manhattan with her husband, Jason, says property taxes are a critical factor in their house hunt. They’re looking in Bergen County and Rockland County, N.Y., at homes with a price point of $750,000. "If the house is great and priced right, but taxes are $20,000, it’s not going to work," said Randi Ungar, 34, an advertising saleswoman. She and her husband, who works in the textile industry and as a personal chef, are now paying about $18,000 a year in maintenance on their place in the city, an amount she calls "insane." She’s not willing to take on a similar burden in property taxes. "If I’m going to move and buy a house, I’m going to want to lower my monthly payments," she said. The Ungars hope to have children, so they’re looking for a town with a good school system. But Randi Ungar is not sure that "brand-name" school districts are worth the high property taxes that go with them. On the other hand, some buyers feel that schools are the only justification for higher taxes. "I see buyers measuring the property taxes against their interpretation of a good school system," said Eileen O’Driscoll, broker/owner of Century 21 Concept 100 in Dumont. Strong schools "alleviate the sting of high taxes," she adds. Some buyers do the math on how much property taxes will add to their monthly payments and decide they "can afford more home when the taxes are on the lower side," said Gary Silberstein, a Keller Williams Village Square agent in Ridgewood. Jaimie Bolnick, also with Keller Williams in Ridgewood, said that some towns seems to draw buyers consistently despite high taxes. She points to Glen Rock and Ridgewood, both of which have median annual property taxes above $13,000 but offer well-regarded schools, attractive downtown shopping areas and commuter rail service to New York. Many homeowners have successfully appealed their home assessments during the housing bust, and some buyers ask whether they should try that, Bolnick said. "There’s always that possibility, but it’s not something I could guarantee, nor would I ever recommend buying a home based on the hope that taxes would be reduced," she said. Property taxes have been growing at a slower rate recently as a result of a state law passed in 2010 that set a 2 percent limit on annual increases. But New Jersey still has one of the heaviest property tax burdens in the nation. According to the Tax Foundation, seven of the 10 counties with the highest property taxes in the nation, based on data from 2005-2009, were in New Jersey, with Bergen ranked No. 4 and Passaic No. 10. "We are a wealthy state, and wealthy states tend to demand a high level of public services," said Henry Coleman, a Rutgers professor who has studied property taxation. "I could say ‘education’ and wouldn’t need to make any more arguments." In addition, he said, local governments in the Garden State rely almost exclusively on property taxes, while in other states, local governments are funded in part by sales and income taxes. And state aid from Trenton to municipalities and counties "has not kept pace with the demand for local services," he notes. Moreover, New Jersey’s home-rule tradition means nearly every town has its own school system, police force and so on — though Coleman thinks that doesn’t add as much to costs as the other factors. Property taxes vary town-by-town for several reasons. Some have businesses whose taxes help fund municipal services, keeping homeowners’ tax bills down. The shopping malls of Paramus, for example, help it keep median property taxes around $7,800, well below the county median. Other towns keep their tax bills lower by sharing costly services — for instance, sending their teens to nearby towns’ high schools. "Most buyers know that in New Jersey, especially North Jersey, taxes are going to be high. That’s just the way it is," says John Pordon of Century 21 Gold Properties in Totowa, where the median tax bill, at $7,150, is the lowest in Passaic County. But that reality is especially painful for first-time buyers, he said. "To expect them to pay almost $10,000 in taxes on their first home is a little too much to ask," he says. "Young couples just starting out can’t afford to do that."