Expert: Jessica Bryan - 4/10/2005

Question
Dear Jessica, I have my own house where I live, and last year I gave a reserve deposit for another house in a complex that is still in pre-construction in South FL. Since I locked in the price of the property to this day, the price has gone up almost $30K. It will be even higher after people start to move in, etc. I'm not sure about the tax implication of selling this property. When can I sell, do I have to wait until the house is built or can I sell now? After selling costs and taxes would this still be a profitable deal? Would you please explain how are the taxes calculated? Thank you, I appreciate your help.

Regards,

R. Grant


Answer
Dear Richard;
You are extremely fortunate to have locked in the price of the home a year ago.  While you cannot sell a home that you do not yet own--and will not own until the home is built and transferred to your name, you can certainly arrange to sell the home now and once it closed in your name, transfer ownership as quickly as you want.  This process of "flipping" property has become quite popular.  Basically, you arrange for a buyer to purchase the home once it is legally yours.

As for taxes, you are taxed on the assessed value of the home.  If it is assessed higher than you pay for it, then you can argue the point and appeal to the tax assessor for a reduction in taxes. Taxes are calculated on the current appraised value of a home and multiplied by the tax rate in your area.  A tax assessor usually relies on reported size, lot dimension and room count to determine value.  The assessor will use comparable home sales in the area to evaluate your home's value.  It is a very imprecise method and is often challenged by the savvy homeowner.  With enough supporting data you can often get adjustments.

I hope that this answers your questions.

Regards,
Jessica Bryan
Managing Broker
House to Home Realty Services