11 Feb #53 Mello- Roos
What is Mello-Roos and why is it important to know about when buying or selling a home?
Mello-Roos Taxes are happening here on the California Central Coast and I want to give a brief recap of what they are, why they are dangerous, and why you should be on the lookout for them!
The Mello-Roos tax or Community Facilities District (CFD) tax became increasingly common in newer subdivisions from 1990 and newer, however, it was often common for a developer to pay the fee and just increase the price of the home. With costs to build higher, and purchase prices higher, many developers are now passing these expenses on to the new purchasers in the form of a Special Mello- Roos or CFD tax. This tax calculation often takes into account property square footage, and size of the lot. Sometimes homeowners can pay these CFD fees off early and other times they cannot. Check each situation individually.
Mello- Roos Taxes are an additional tax charge in addition to the normal 1% property tax rate as calculated by Proposition 13. Mello-Roos is commonly charged in specific Community Facilities Districts (CFD) as an extra BOND attached to a home. Most Mello-Roos typically have repayment periods of 25-40 years. These tax amounts can vary each year a have the potential to increase of up to 2% per year. Repayment payments cover the cost of repaying the bonds plus what is considered reasonable administrative Costs. The tax is included with your general property tax bill as a special tax lien and is recorded as a “Special Tax Lien”. If a tax bill is not paid within 90 days, the CFD could have the right to foreclose on the property! Which could mean an expedited Forclosure!
When selling a home, homeowners who have a Mello-Roos of CFD tax, must disclose this tax to new homebuyers and are encouraged to fill out a form notifying the new buyer of the tax and any other special terms of the tax. This tax will be taken into account when the new buyer qualifies for a loan and should be disclosed as soon as possible.
This only touches briefly on some of the things to know about Mello- Roos and if considering a home that has a CFD, just be aware and prepared!
Very best, Krista