Understanding Property Taxes Before Purchasing Your San Francisco Home

The anticipation of purchasing a new home is an exciting yet stressful time in learning about what all your costs will be and exactly how much for each. Besides the obvious price of the home, there are additional fees such as closing costs, insurance, and of course, taxes.

It’s important to fully understand what your property taxes are and how they are calculated prior to closing. That way, you can be prepared and not get caught off-guard when you receive the bill.

This guide can help explain what to expect when it comes to paying property taxes in San Francisco County prior to purchasing your home.

Remember you should always consult with a tax professional about the specifics of your current situation, as this blog does not constitute official tax advice.

Most home buyers are aware that property taxes are part of the home-buying process but are not quite sure what they entail. In San Francisco County, property taxes are taxes that you are required to pay by the city or county upon owning a home. The amount of tax you must pay is dependent on the value assessed of the home and land it is on.

The value assessed is usually the price you pay for the house at closing if it is at market value. As you likely know, the values of homes fluctuate from time to time. Although properties tend to appreciate over time, there can be periods where they decrease.

In the event you disagree with the assessed value (too high, resulting in higher taxes) of your home, you can appeal to the Assessor’s Office to reappraise your property.

Many times, property tax and real estate tax are used interchangeably as the same thing, but they are different.

In San Francisco, real estate taxes cover your “real property,” such as the home you are about to buy, a vacation home, or an investment property.

Instead, property taxes are taxes on your tangible personal property, such as your car, equipment, tools, office furniture, etc. These are items that can be seen, touched, weighed, and measured.

Now that we have defined the difference between “property tax” and “real estate tax,” any reference to taxes in this post is the real estate tax.

The real estate tax on your property can increase up to 2% per year while you own it or by a larger amount if there is a change in ownership.

When you are looking at purchasing a home, the way to calculate what you are expected to pay in taxes is to multiply the assessed value of the property by the real property tax rate in San Francisco County (or whichever county you are in). The assessed value when buying a home is the purchase price you intend to pay to obtain ownership.

Property taxes are billed on a fiscal year running from July 1st of one year and ending June 30th of the next year. When referencing tax years, you will see 2021/2022 or 2022/2023. You will be billed twice per year with the amount paid over two separate periods.

The first payment will cover July 1st - December 31st, and the second payment will cover January 1st of the following year to June 30th.

Payments are due on November 1st and February 1st but are considered late after December 10th and April 10th, subject to penalties.

The property taxes you pay each year go toward paying for schools, police, fire department, EMS, roads, parks, libraries, streetlights, sewage, and trash disposal, plus salaries of local government employees.

Upon closing, you (the buyer) are responsible for paying the property taxes, but there can be some variations. If the seller paid the taxes in full at the beginning of the fiscal year, you would prorate and owe the seller at closing.

On the other hand, if the seller failed to pay their taxes, you need to be aware of this and settle it at closing otherwise, you are responsible for it.

It is important to pay your property tax by the due date to avoid penalties. There are several convenient options, including paying by mail, online, in person at the Office of the Treasurer & Tax Collector, or as part of your mortgage payment.

Depending on the lender you use at closing, it is possible to include your property tax in your monthly mortgage payment.

There are two Mello-Roos districts in San Francisco County, one that includes the city of San Francisco and an area South of Market (SoMa).

If you purchase a home in one of these districts, there are bonds for the upkeep and maintenance of community facilities that are passed onto you via annual tax levies. You will see this added tax on your property tax bill.

A property’s value will be reassessed when there is a change in ownership or there have been significant improvements to the property, such as adding a room or a new bathroom that required pulling permits for example.

Ready to begin your search for that new house? If so, work with an experienced realtor such as Beverly Barnett, who can guide you through the search, putting together an offer, and the process at closing.

When searching for homes for sale in Sea Cliff, Beverly has over two decades of experience as a top realtor in the San Francisco area. Don’t hesitate to get started with your Sea Cliff real estate journey and contact Beverly Barnett today.