Post-Purchase Property Tax Disclosure Law – Effective Date April 1, 2008

Starting April 1, 2008, all seller’s (including the sellers real estate agent) in Montgomery County MUST disclose the post-purchase property taxes on any written or electronically transmitted material produced or distributed in connection with the advertisement for sale of a residential real property.  As part of several amendments to the legislation, GCAAR worked with the County Council to put language in the legislation that clearly states that the Office of Consumer Affairs MUST assist a seller in estimating the tax information and provide a web-based worksheet or steps to enable the seller to do the proper calculations.  As of February 6, 2008 the Office of Consumer Affairs was working with the County’s Department of Technology Services to develop an online property tax calculator that once a street address was entered would produce the post-purchase property tax number.  Further, the issue of what constitutes an “advertisement” has been defined by the County Council to include advertising flyers, free real estate guides, newspaper advertisements, and other types of ads (i.e. Washington Post Ads, Gazette Ads, The Real Estate Guide, Homes and Land, etc.).

For assistance on doing the calculations, here is the contact information for the Office of Consumer Protection: Phone: 240.777.3636 Fax: 240.777.3768 General E-mail: ConsumerProtection@montgomerycountymd.gov

Below are more specific details on what the estimated post-purchase property tax must include: 

• the estimated tax must be based on all rates in force when the material is produced
• all State and County property taxes (including special service area tax) and any applicable municipal property taxes
• any other non-tax fee or charge included on the consolidated tax bill
• both the annual property tax that the current owner pays and the annual estimated property tax that the buyer would pay MUST be featured equally prominently on the advertising material produced
• the estimate of taxes MUST be updated each July 1, to reflect changes in tax, fee, and charge rates
• the estimate of taxes MUST be updated by January 31, if the current fiscal year is the third year of the property’s 3-year assessment cycle, to reflect the revised assessed value of the property

A SELLER OR THE SELLER’S AGENT IS NOT LIABLE FOR ANY INCORRECT ESTIMATED TAX INFORMATION DISCLOSED, IF THEY HAVE RELIED IN GOOD FAITH ON A METHOD APPROVED OR RECOMMENDED BY THE COUNTY.

* The county is still working out what format we’ll use to calculate this tax.  Why are they doing this, you ask?  When buyers look to purchase property generally the tax that is listed is the seller’s payment, which takes into account the homestead exemption.  So it can be significantly less than what a new buyer will take on when they buy the property.  The bank generally figures in the new tax rate when they are doing good faith estimates, but there are those lenders who mask this true cost and reveal it only at settlement when the clients are hostage to whatever financing is in place.  Shame on them.

It’s precisely because of this there is new legislation in place to ensure that buyers know the taxes will be higher.  Then they can apply for their own homestead exemption in MD.  I’ve done this all along for my buyers so there’s no change in my process other than more cumbersome paperwork or in my case more spreadsheets!