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bearishgurl.
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October 11, 2012 at 10:13 PM #20190October 11, 2012 at 10:22 PM #752521
bearishgurl
ParticipantThe annual tax savings alone is worth a fortune, of course, depending on how long you plan to keep the property!
The $64M question is, how much is the asking price in comparison to its “sold comparables” and how much will the sellers actually accept?
October 15, 2012 at 7:36 PM #752645Jazzman
ParticipantMills Act sounds great, but renewal is not guaranteed I believe. Quite why a home suddenly no longer qualifies as historically significant is a mystery. One woukd assume with the passing if time, the significance is greater. I guess diminishing tax revenues are more significant.
October 16, 2012 at 8:37 AM #752651bearishgurl
Participant[quote=Jazzman]Mills Act sounds great, but renewal is not guaranteed I believe. Quite why a home suddenly no longer qualifies as historically significant is a mystery. One woukd assume with the passing if time, the significance is greater. I guess diminishing tax revenues are more significant.[/quote]
The only way I know of that a CA owner’s Mills Act tax treatment would be non-renewed is if he/she made alterations to the street view (or interior) of the property that was not in keeping with its historical significance and their respective city/county found out about it.
Owners with Mills Act tax treatment would be rock-stupid to attempt this, IMHO. The potential for many thousands of dollars loss (in additional annual taxes) is too great, ESP if they had to draw permit(s) to do (the disallowed) renovations.
I would LOVE to own one of these properties! Even if they don’t have garages, an owner is allowed to build one if the setbacks are present on the lot and its design is in keeping with the historical significance of the house. The problem (at least in Chula Vista) is that when one is listed, the owner asks $100 – $300K more than its recent sold comps would indicate it is worth (for a property under $1M) and at least $500K more for a $1.5 to $2M property. It’s as if the current owner is trying to extract future tax savings from the new owner in the form of a much higher sales price. My studies have shown that the majority of “Mills Act” listings seem to be withdrawn from the market unsold for this reason.
October 16, 2012 at 8:58 AM #752652bearishgurl
ParticipantI realize a lot of these Mills Act properties have “sweat equity” in them and in some of them, the sweat equity was all “earned” by the current owner. I’m not saying “sweat equity” has no value to a current buyer. I am mindful of how much work it takes to hand-sand a staircase bannister and built-in cabinetry, for example.
However, most these owners were already paid for a good number of years for their “sweat equity” in the form of drastically reduced property tax bills. And I know one who even got a $25K “grant” from the City (for materials) that they installed themselves. These free materials combined with their “sweat equity” no doubt increased their property value hundreds of thousands of dollars over time. Many of the current owners bought their properties as “gut-rebuilds” for a song and made application to the Mills Act themselves. Therefore, I don’t feel these current owners need to recover every “labor of love” (in the form of an exorbitant sales price) that they did to their properties. If they are truly “preservationists,” they should endeavor to sell to someone who will greatly appreciate having and displaying their property in all its glory and has the will and means to maintain it properly for the life of their ownership. These buyers can be found from SOHO, the various local period-design groups and RE brokers specializing in historical properties.
October 16, 2012 at 9:26 PM #752669Lastraniera
ParticipantThanks everybody contributed to the discussion. I actually called the County Assessor with the question about the transferability and the value of Mills Act deduction and (surprise!) got a very detailed and positive answer.
Each house with Mill’s Act has so called Mill’s value which is 25-70% of its market value. This value is used to compute the property tax. The 2 important facts I learned from the Assessor about Mill’s value are:
(a) The Mill’s value (and related property tax) do NOT depend on the sale value of the house. If the house is sold for $800,000 or $1,200,000 the property tax is going to be the same as it has been before the sale.
(b) The only 2 things which can affect the Mill’s value are if the house is not the primary residence or/and if you build an addition. In the latter case, the value will be reassessed as it has been with the property I am interested in. But even in this case, the increase in Mill’s value was maybe 25% of the market value of the addition. For example, if the house before the addition would sell for $600,000 and after addition for $1,000,000 (making the market value of the addition to be $400,000), the Mill’s value may go up by $100,000.bearishgurl, you are right about the owner trying to sell for 10-15% above the marker price suggested by comps.
Thanks again.October 17, 2012 at 12:33 AM #752671Jazzman
ParticipantI’m only repeating what a Realtor told me, who was selling a house with the Mills Act in place. It may depend on the city. I believe some cities don’t even acknowledge the act. I’d want to be rock solid sure that the terms cannot be revoked other than for the obvious above-mentioned.
October 17, 2012 at 10:18 PM #752759bearishgurl
Participant[quote=Jazzman]I’m only repeating what a Realtor told me, who was selling a house with the Mills Act in place. It may depend on the city. I believe some cities don’t even acknowledge the act. I’d want to be rock solid sure that the terms cannot be revoked other than for the obvious above-mentioned.[/quote]
see: http://www.ohp.parks.ca.gov/?page_id=21412
GENERAL MILLS ACT QUESTIONS and ANSWERS
Q: My property or a property I am considering buying is already under a Mills Act contract. What does that mean to me as a property owner?A: Mills Act contracts are for 10 years initially with automatic yearly extensions and stay with the property when transferred. Subsequent owners are bound by the contract and have the same rights and obligations as the original owner who entered into the contract. Because the local government and the property owner negotiate other specific terms of the contract, you need to contact your local government to determine the rights and obligations a Mills Act contract creates.
For related legislation, see also:
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=gov&group=50001-51000&file=50280-50290 -
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