Price Point Study
Are the prices being used to set the Special Taxes for the CFD/Project representative of current market conditions, so that the prices for which the homeowners purchase the homes will have a tax burden that conforms to the Issuer’s policies, such as a maximum of 1.8% or 2.0%?
If the prices used to set the Special Taxes turn out to be higher than the prices that the homes actually sell for, due to the developer/builder using aggressive prices which is sometimes the case, then the homeowners would have tax burdens in excess of the Issuer’s policies.
The Price Point Study involves a competitive market analysis of the proposed prices/values for the forthcoming residential and/or business/retail products in the CFD so that the Special Taxes as set-forth by the Rate and Method are in conformance with the Issuer’s tax burden policies for homeowners/final-users.
Once the Issuer establishes the Special Tax Rates, they are typically NOT subject to downwards revision should, for instance, market prices/values decline, due to an economic slowdown so it is important to set them properly at formation.
As a safeguard, Empire Economics utilizes current prices/values (excluding potential future price appreciation) and base prices/values (excluding options/upgrades) as a foundation for its price recommendations.
Example:
A Price Point Study for a new CFD in Riverside County revealed that the proposed prices set-forth by the developers/builders (red line) were significantly higher than the prices for nearby comparable projects (green line). Consequently, if the developers’ prices were used to set Special Taxes, then the result would have been tax burdens in excess of the Issuer’s guidelines.
If the prices used to set the Special Taxes turn out to be higher than the prices that the homes actually sell for, due to the developer/builder using aggressive prices which is sometimes the case, then the homeowners would have tax burdens in excess of the Issuer’s policies.
The Price Point Study involves a competitive market analysis of the proposed prices/values for the forthcoming residential and/or business/retail products in the CFD so that the Special Taxes as set-forth by the Rate and Method are in conformance with the Issuer’s tax burden policies for homeowners/final-users.
Once the Issuer establishes the Special Tax Rates, they are typically NOT subject to downwards revision should, for instance, market prices/values decline, due to an economic slowdown so it is important to set them properly at formation.
As a safeguard, Empire Economics utilizes current prices/values (excluding potential future price appreciation) and base prices/values (excluding options/upgrades) as a foundation for its price recommendations.
Example:
A Price Point Study for a new CFD in Riverside County revealed that the proposed prices set-forth by the developers/builders (red line) were significantly higher than the prices for nearby comparable projects (green line). Consequently, if the developers’ prices were used to set Special Taxes, then the result would have been tax burdens in excess of the Issuer’s guidelines.
