One of the most frustrating things about my move to Fargo is special assessments.

I have about $45,000 worth of them to pay off, as a part of my newly built house.

Special assessments, also known as specials, can be confusing and frustrating.

So I wanted to write about them to help you because I figured by being helpful you’d avoid some of the stress I uncovered when learning about specials.

Not to mention very few realtors or real estate offices in the Fargo-Moorhead area are blogging about them. And they should be. They should be talking about special assessments because by educating readers, they’d fill their sales pipeline with potential clients by building trust and credibility.

If you’re a resident of Fargo or someone like me who recently moved here, you need to know about special assessments and how they impact you. Because they will.

What are special assessments?

If you live in a house, condo, or town home that is part of a planned, covenanted community, you most likely have to pay monthly Homeowners’ Association (HOA) fees and, at times, you will have to pay special assessments (referred to as specials. credit: www.answerthepublic.com)

Special assessment is the term used to designate a charge that your local government or municipality can assess against a real estate parcel for certain public projects. This charge is levied in a specific geographic area known as a special assessment district (SAD).

Pretty boring, right?

In West Fargo, specials are a method the city uses to pay for infrastructure improvements. Specials cover things like the diversion project, which protects Fargo from flooding, water main replacement, etc. The cost of these projects is divided among home owners in a geographic area.

It’s essentially a method of financing that’s legal because of the local law. Not all city projects are paid for in this way, just most of them are in West Fargo. Some infrastructure projects are funded through the city’s general fund or bonds.

What is the special assessment fund?

When you pay your specials, the money goes into a designated fund.

Think of a HUGE checking account with millions of dollars in it. These funds or accounts are set up for expenses incurred for capital projects.

But this fund is different and separate from your taxes.

Special assessments vs taxes.

Property owners, like you and me, often confuse property taxes and assessments.

They’re not the same. For instance:

• Special assessment costs originate from a lump sum that’s divided over a period of time.
• Taxes do not originate from a lump sum.
• Taxes are deductible when you file your federal tax returns.
• There is no tax benefit for specials.
• Assessments, not taxes, are determined by local assessors.
• Taxes are determined by school boards, town boards, city councils, county legislatures, village boards and special districts.
• These jurisdictions are responsible for taxes, not assessments.
• Your specials can also increase at any time, while your taxes may actually decrease (or vice versa). It’s crazy, I know.

If, like me, you feel your assessment is too high, then you need to discuss it with your assessor and work to contest your assessment amount through your locally elected officials. (a huge battle to fight, by the way)

What special assessments are tax deductible.

The short answer is none.

When you file your annual taxes, homeowners can deduct the cost of state and local real estate taxes on federal income tax returns. According to the Internal Revenue Service, property taxes are deductible only if they are imposed uniformly on all properties in a jurisdiction and based on the assessed value of a property.

Special assessments do not fit this criteria, however. There’s zero tax benefit with specials.

How are special assessments calculated.

While taxes are paid annually, through a monthly payment escrowed inside your monthly payment, specials are a lump sum divided over a period of time.

For me, my specials are in the amount of $45,000 and broken out annually over a 12 year period. $45,000 divided by 12 = $3,750.

That’s a lot of money. I pay that amount annually just for my specials. My taxes are completely separate…and similarly expensive.

My property tax cost is calculated differently and the annual cost is determined by your local school district, whereas specials are calculated by the cost of infrastructure.

Specials can make it tough when buying a home.

I’m not a millionaire.

Therefore I’m not flush with tons of cash to be able to afford anything and everything that I want to buy. Including costs associated with a new house.

When I was considering building a house, I knew that location was the most important aspect. Next, I knew that choosing a house with a great layout was key.

Then there were specials. I essentially had to tack on $45k in expenses (or whatever the specials costs were in that area) and plan accordingly.

Early on my journey to buy a home in Fargo, it sucked. I was priced out of homes in a certain price range because of special assessments.

And some of those homes that I was interested in buying are still sitting for sale, a year and a half after I moved to Fargo from Minneapolis-St. Paul. That’s sad because someone’s paying for them and somehow that cost is being passed on to you and me.

Specials can make it tough when selling your Fargo home.

A quick story. There was a house for sale in a neighborhood close to where I now live. It was newer, and really nice. A rambler with a lot of details that I loved.

But…the house had over $50,000 in specials on it. For me, that’s a lot.

Then, a competing house across the street hit the market. Same price, similar specs and just as nice. Only it had $20,000 in specials, instead of $50k.

If you’re a buyer which one do you think you’ll choose? The one with the lower specials, of course.

The point is this: special assessments can make it harder, or easier, to sell your place depending on the amount of your specials that are owed.

Specials are a part of life, plain and simple. While they’re annoying and costly, it’s pretty hard to completely avoid them.

Before you buy your home, or build one like I did, be sure and ask questions. Lots of them. No one is going to educate you or tell you about these points related to specials.

You’re going to have to take responsibility and educate yourself through a lot of research.

Blog about specials.

And if you happen to be a Fargo realtor, you need to be blogging because its one of the best and most economical ways to get customers and keep them.

I’d consider blogging about all kinds of topics, specials included.

And if you happen to be moving to Fargo or recently moved here from another area and have questions about specials, email me by clicking here. I’d be happy to give you some good advice and wisdom to help navigate these murky waters know as specials.