For some time it's been quite apparent that the Cook County property taxes at 340 On The Park were going to double but not everyone was on the same page. The first clue was that the estimated property values of the units for 2011 were about half of the true market value. As I always tell my buyers, when the property taxes seem too low to be true you should assume that eventually they will go up. If the county has the estimated value too low they will eventually figure it out.
Then when the 2012 re-assessment was performed across Chicago those estimated property values jumped up - pretty much doubling. That basically sealed the fate of this building since property taxes are proportional to the county's estimated property values. In fact, for 2011 Chicago property taxes were about 1.6% of the estimated property value and we now know that 2012 taxes are about 1.8% of the estimated property value.
I was explaining all this to a client a few months back who was enthralled with the low property taxes in this building and just for kicks I decided to call the listing agent for the unit he was interested in and get her take on the property taxes. When I pointed out that the estimated property value for her unit had recently doubled and that this meant the property taxes were going to roughly double she seemed rather clueless - about both the change in estimated value and the implications for the property taxes.
Who knows if she was just acting but I've had the same reaction before from real estate attorneys representing sellers when we get into the issue of proration of property taxes on a contract. You see...if you're negotiating a contract after the property values have been reassessed but before the taxes have actually been determined the buyer will get stuck paying some of the seller's property taxes if the proration doesn't take into account a pending increase in taxes. And I've had this reaction from several sellers' attorneys. Yet it's basic math.
The proration is one consideration for the home buyer but the bigger consideration is: what will the ongoing property taxes be? And even now that the 2012 numbers are known many of the listings at 340 On The Park are still showing the much lower, obsolete taxes for 2011. In fact, only one listing is showing the 2012 taxes.
So if the buyers' agents don't catch this will the buyers' attorneys? And at what stage of the transaction will this be brought to the attention of the buyers?
And here is the real kicker. Even though the 2012 Chicago property taxes are known right now it's going to be at least another 6 months before real estate agents will be required by the MLS to put those updated taxes on their listings - because it will be 6 months before all the different counties are updated. So buyers beware!
Why Were Estimated Property Values So Low At 340 On The Park?
I'm afraid I don't have an answer to that one. It's definitely curious. Could it be that the building was given some kind of tax break because it was LEED certified? I have poked around but could not find any evidence of that.
If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think I'm the next Kurt Vonnegut you can Subscribe to Getting Real by Email.