State Rep. Richard E. Hammel (D-Mt. Morris Twp.) has introduced legislation that would amend the General Property Tax Act by requiring a separate disclosure statement, stating the anticipated amount of the taxes (the pop-up tax) following a transfer of ownership. Additionally, HB5882 would require a full disclosure statement be signed by the buyer and seller, real estate agent, or closing agent.
"This disclosure is important because homeowners have a right to know what their tax obligations are going to be before they purchase a home," said Hammel. "Often, when a home is sold, the buyers are not fully aware of the pop-up tax. A new homeowner is then stuck with an increase in taxes significantly higher (sometimes thousands of dollars more) than they anticipated."
Currently, the assessed taxable value of a home has strict limits on how much it can increase annually – either by 5 percent or the rate of inflation, whichever is lower. However, when the property is sold, its assessment is uncapped. In some cases, the amount of taxes a new homeowner must pay doubles, making it difficult for working families to afford the home they have purchased.
The purchase of a home is usually the largest investment that people will make during their lifetime. Hammel says, "We have a responsibility to protect buyers, especially first-time homeowners. Anything that can be done to fully inform people of their tax obligations will help to prevent unnecessary hardship and even foreclosure."