Does Mello Roos adversely affect the resale value of a property?

Asked by David Young, Sacramento, CA Wed Oct 19, 2011

I'm looking at purchasing a property in Rocklin and I've noticed that the previous owner's tax bill has a mello roos tax of $1700 alone! The the taxable value of the house if only $200,000!

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6
Paul Rinde, Agent, Menifee, CA
Wed Oct 19, 2011
No. But it does affect the number of potential buyers. Some buyers are adverse to Mello Roos and do not want to purchase a property with them.
2 votes
Dyane Riemer, Agent, Rocklin, CA
Thu Oct 20, 2011
Hello, David!

Mello-Roos (MR) in and of itself does not necessarily affect the resale value of a property in the area in which you are looking. Most buyers in Rocklin know that Mello-Roos is part of living/buying there, especially in the 95765 zip code. $1700/year Mello-Roos is very average for that zip code. There are a few subdivisions within that zip code where it is less; however, there are many more where it is significantly higher, especially in the Whitney Ranch area where it can be over $2400/year in some communities! Typically, although not always, the newer the house is, the more the Mello-Roos bond is. Many buyers prefer newer homes with the bells and whistles, and are willing to pay the higher Mello-Roos in order to have those amenities. So, in answer to your question about resale value, the Mello-Roos does not necessarily affect the resale value, depending on what the buyer is looking for.

The good news, David, is that if you are looking to purchase a $200k property in Rocklin, it *most likely* has a shorter term Mello-Roos bond that does not fluctuate. Many (not all) of the MR bonds in Rocklin that were put in place prior to about the year 2000 were 25-year fixed bonds, which means that those bonds will be paid at the same fixed amount every year for 25 years until the bond is paid off. So, it is possible that by the time you go to sell the home you are purchasing, the MR could be paid off, which *may* make it more attractive to a new buyer, unless of course, they are looking for a newer home.

If you want to know the exact number of years of a MR bond and whether the yearly amount is fixed or not, you can do a couple of things. First of all, a Natural Hazards Disclosure Report (NHD Report) will have that information for you. Your Realtor or Escrow Officer can order one for you once you are in escrow. If you want to know that information prior to going into escrow, follow the directions I gave you in one of your other questions regarding finding out the amount of MR on a property. Once you get into the actual online tax assessment page, look at the very top where it says in red, "View Tax Bill". Click on that link, and there will be telephone numbers and contact names of people who administer specific assessments and bonds for that property. You can call them directly and find out any information you need.

David, I suspect that you may be worried about paying MR in addition to whatever payment your loan officer has given you. Know that when a loan officer qualifies you for a loan, they estimate taxes at 1.25% of the purchase amount. This estimated amount nearly always covers your MR payments, so you most likely will not have a higher payment than what you have been quoted, but check with your loan officer to be sure.
1 vote
Jason Fogelm…, Agent, Del Mar, CA
Wed Oct 19, 2011
Hi David,

I'm based here in San Diego, and I show homes with mello roos on a weekly basis. The cost of mello roos is important for a buyer when figuring out your monthly expenditures for home ownership. If you're looking at a home with mello roos, chances are you're looking at a newer home in a newer area, which is a huge upside for buyers. It comes down to personal preference.

Here in San Diego, Prop 13 states that property taxes can't go above 1.1% (although we use 1.25% of purchase price when factoring property taxes). In some locations, if you add in mello roos, the tax base can get as high as 1.9%. Mello Roos is a 25, 30, or sometimes, 40 year tax assessment for an area.

One last note: It's my understanding that if the Mello Roos is located in a CFD (Community Facilities District), they are tax deductible. I would double check that with your CPA / Tax Attorney.

Good luck!

Jason Fogelman
Prudential California Realty
jason@foghomes.com
858-876-2003
0 votes
Carol Perdew, Agent, Manteca, CA
Wed Oct 19, 2011
David,

Mello Roos is an assessment that buyers have to agree to pay when buying a home with this consideration. Some buyers love a home or particular community in which they agree to pay this extra assessment.

Buyers should remember that some buyers will never pay for extra assessments which provide a smaller group of buyers. There will always be competition from the homes that don’t have Mello Roos.

Thanks,
Carol Perdew
Prudential California Realty
(209) 239-7979
Carol@PerdewHomes.com
DRE 985176
0 votes
BG, Home Buyer, Phoenix, AZ
Wed Oct 19, 2011
yes it does big time ... 1700 per year for 10(?) years is like 17000 down the hole ... that is almost 10% ...
0 votes
Melia and Ol…, Agent, Rancho Santa Fe, CA
Wed Oct 19, 2011
The cost of Mello roos and HOA fees are a factor buyers look at when purchasing.
Web Reference:  http://www.theindras.com
0 votes
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