"No Bond" is promoted in home sales. But what's the real savings?
 

We visited the Brownwood TS to introduce ourselves and interest. But the realtor we were assigned on our first in-person visit has refused to answer one of our most basic of questions multiple times (she seems to keep copy/pasting the same answer to my very direct question).

My simple question is this: We've seen several really nice properties that promote the fact that they're "NO BOND". As if it was some huge savings or advantage. I just want to know: "What is the average real-world saving on a property with a bond vs. no-bond?"

The sales brochures shows the monthly fees as "bond+maintenance+fire" so you can't gauge what percentage each makes up.

I totally understand the concept of the bond and I totally understand why each "Villages" bond may differ in terms of price. But we're merely trying to ascertain if a property being highly-promoted as "NO BOND" is really that significant and should be given priority in our choices.

Can anybody please answer this question honestly? My assigned realtor can't or won't.

So do you like giving away 10, 20, 30 ,40 thousand? If bond not paid you have to pay it if you buy the property.

:)Residential Bond Assessment Information - for Bond Amortization Schedules. The District web site is full of information too. -https://www.districtgov.org/

Bonds are different for different houses and in different Districts. Everyone pays $125 for Fire in Sumter Co.

Look up resales on the County Web Sites:
Welcome to The Property Appraiser's Office for Lake County, Florida
Home - Sumter County Property Appraiser
MCPA Home

:ho:

Check the comp's for comparable homes with and without bonds.

When we bought, there was no difference in purchase price.

From what I heard, the bonds on the newer homes are reaching $50,000. But, that doesn't mean EVERY new home has that amount of bond. The bond payments are NOT included in the purchase price. The payments are amortized over 30 yrs and you pay interest.

Instead of just using a villages rep, get in contact with an MLS realtor. They work for agencies outside of the Villages. They sell preowned homes not listed with the Villages. You should work with BOTH agents. If you can't get answers from the Villages rep, the MLS rep will fill you in.

Bond payments are added to your tax bill annually. Ask what your taxes, including the bond payment, will be before purchasing. Each county has different tax rates. With a bond, your tax bill can be 7- 10 thousand dollars per year.
Good Luck!

Note that you don't have to work with an "assigned" agent. You can fire the agent and select whatever agent you want to work with. Do a little research and find an experienced agent who you like and ask them to show you some houses.

Chris Hallmark is one of the most experienced and best agents who works for The Villages. If you call him, I am sure that he will show you any of The Villages houses and answer any questions you have.

No bond in Lady lake

It may not be possible to give an overall average savings. There are too many different bond amounts and too many homes to calculate it. Still, your person could do a better job of answering your question.

For just a general ballpark use an annual payment of $1,800 with 15 years left for a total amount of $27,000.

NOTE: the amount will be less in the north and far more in the south.

It is easy to determine an exact amount for any home:

• - Use the address of the home to find the most recent tax bill
• - Look for the bond line in the lower section. If it is not $0 then you can challenge the statement that it has been paid off
• - The tax bill will show the Section number for the home
• - Use the Section number to find the bond amortization schedule on districtgov.org
• - If the bond is not paid off then you have the choice of paying the current balance or the remaining annual payments. THAT is the savings on a home with the bond already paid.

I think our maintenance fee is about 700/year. So you pay that regardless of bond being paid off.

My guess is the value of the house will be related to bond paid or not. So a re-sale probably adjusts price up if bond is paid. Most likely it's a wash, but at least one less thing to deal with if it's paid.

Buying a home where the bond is paid of is a big savings. The average interest on a Bond is around 6% and probably higher on new homes. That can be more than $1600 -$2000 a year on your tax bill.

That's true so if the buyer is paying cash it's definitely a benefit to have it paid. But if they pay cash and pay off the bond too I still think it's a wash. If you have 2 models exact same model and lot in the same location and one is 400K with no bond and the other has a 25K bond they probably will be listing for 375K.

That's really just my opinion but I'm sure people take into account bond value when setting a list price.

"No Bond" value
 

From what I've seen over the last 4 years, the market value of a preowned home does not seem to increase by the bond payoff amount. "No Bond" seems to be a tie-breaker, when evaluating a home purchase. It does, however, save real $$ annually. If a home buyer plans to stay in their house "forever", then paying off the bond makes sense. However, I've heard that the average buyer in The Villages buys/moves to a new home 3 times (validity unknown). My wife, however, informs me that we are "one and done"!

You can change Villages agents any time you choose. Andrew Mitchell (352-615-7485) has handled 24 buy and/or sell transactions for my friends and family - I highly recommend him.

"Simple question What is the average real-world saving"
Simple answer - $30,000

You question is simple, but the answer is not. Bond amounts vary because the age of homes vary. I'm not sure an average answer is the best thing to have. It would be better to look at each house that you are interested in individually.

Now, should it be a priority? It was not for us. We bought the house we wanted in the area that we wanted to live. If we paid a little more, so be it. For us it is worth it.

I think of the bond as an assumable second mortgage that is attached to the house and is not included in the sale price. So as I see it, the actual price of the house is the sales price PLUS the remaining bond balance. Or to put it another way, you must pay the sales price in full PLUS the remaining bond balance in full to claim your house is free and clear.

I do not believe you can recoup the bond pay-off in a resale unless the bond is at the end of its term. I have chosen to think of it as "just one more thing" not to think about except at tax time.

In my limited ownership of 8 years, I do not remember anyone fretting about the bond, one way or the other.

JMHO

In fact, there was a difference in price. If comparable houses with and without bonds were sold at the same price, the actual consideration for the "Bond" house was higher by the amount of the bond.

A statement that the price is the same is a sales agency subterfuge. A house with a bond in essence has a lien superior to a mortgage and is a preferential claim on your equity.

Pose the question to a CPA, a Certified RE Appraiser, and then to a RE sales agent.

When buying my house one of the features was no bond. I thought" that's nice" but it made no difference in my negotiations as I didn't know about bonds here.

That's exactly what it is. Essentially, an assumable 2nd Mortgage (that's in a 1st position, like taxes). It's good to see someone post a clear, concise and accurate answer to the OP's question.

Also, as far as I know, the bond payments and interest are NOT deductible on income taxes. A few years ago, the bond interest rate was higher than our income interest rate, we made the decision to pay off the bond, today it would be the opposite. My point there are several things to consider. IMHO, figure out your planned monthly budget, and see if the additional bond expense is a deal breaker.

That is correct from what my CPA told me.

Many people simply deduct them, because it appears as "Taxes" on the payment to the County and unless there's an Audit, the IRS may not catch it. Not that anyone in TV would cheat on their taxes.

I assume (but don't know), that they can be capitalized as part of the home's purchase price? Surely they can be, on Investment property.

Are CDD Fees Tax Deductible? A New Homeowner's Guide

Are CDD Fees Tax-Deductible?

Forget about the bond price and look at the bottom line. New house + Bond = Full Cost of house. No bond house is the full contracted price of house.

I’ve sold 5 homes here in villages I did not pay the bond off on any of them .there are people who will try to offer you the price for the home after they deduct the bond those bids are quickly shot down . I’m not sure but I think the longest it took to sell one of my homes was about a month . it’s nice if you find a house with no bond but.I don’t think it’ll be much difference in price from one with the bond ,

Bonds are meant to hide the true cost of a house from appraisers. Most likely, if the cost of infrastructure was rolled into the price for a home, no bank would be able to justify giving you a mortgage. But, when you go for a loan and 40 or 50K is in another bill, your house will appraise correctly for a mortgage

The difference between a mortgage and a bond is that a mortgage is a personal debt against the property owner. But, a bond is a debt against the property itself, not the owner. So, the owner can be sued for non-payment of a mortgage, but they cannot be sued for non-payment of the bond.

Also, I don't think an appraiser or a bank considers the bond when calculating the collateral or loan value of the property.

It’s not rocket science. Add the principal amount of the bond to the price of the house. It’s money the homebuyer is obligated to pay, unless they sell the home and pass on the remaining unpaid obligation to the next buyer. If two identical homes are priced the same but only one has a bond, it’s a no brainer, the one without the bond is a better value.

True, but, in most cases, the buyer is not willing to pay the bond principal.

I think most folks no longer itemize deductions after the Tax Cuts and Jobs Act of 2017, and if they do, State and Local Taxes (SALT) has a $10,000 cap on the deduction. That being said, most of the provisions in that tax cut were temporary. It was passed under Reconciliation in the Senate which avoided the filibuster, and because the law added to the national debt, the provisions were made temporary and most are set to expire after 2025. It will be interesting to see if Congress acts to extend them or if they will revert to the pre-2017 tax code. If it does, the standard deduction will go back down and many more folks may go back to itemizing and the deductibility of the bond may be more of an issue. It may not be mortgage interest, but is it a tax?

We chose not to pay off our bond because the interest rate on the bond is lower than the current interest rates for savings. That equation could change going forward and we will keep our eye on that. The bonds in the new sections in the South are more expensive not only because the bonds are higher, but so is the interest rate. A bond of $40,000 with an interest rate of 5.47% carries an annual payment of a little over $2,900.

IMO Everybody tries cheats on taxes why they have so many exemptions. Why federal will never go to flat tax? Lawyers make rules so lawyers can get paid long with down steam associations like IRS, CPRs, tax negotiators services, and tax prepare services. IMO flat tax ONLY fair way, no deductions you make this you pay this, I don’t care have many kids you have, how many charities, or foundations you have. But, that will never happen cause
rich will never pay their share. Yes I can have opinion.

The bond is not a tax. The interest on the bond is not tax deductible because, unlike a mortgage, the bond amount is not based on the value of the house. The bond interest is listed in the non-ad valorem section of the tax bill because it is not a tax and it is not "based on value" which is what "ad valorem" means. You cannot deduct anything in the non-ad valorem section unless the house is rental property. Some people deduct the bond interest on their income tax return because they either don't understand that it is not deductible or because they are cheating. Actually, you can deduct anything you want on your tax return as long as the IRS doesn't catch it.

Cause it separate loan.

Our case was the opposite.

We bought our new house in 2016 and the interest rate on our bond was 6%, which was much higher than our interest rate on our savings. Therefore we paid off our bond.

The newer the home, the more you save. Cash in your pocket, no future principal, interest or administrative fee. Every property can be looked up on village’s amortization site.

Treat it as a reduction of the purchase price. The realtor should be highlighting this in advertising

Also a thought on Non-Ad Valorem assessments.....
I do believe you could make a strong case to deduct both the Fire Assessment and the Maintenance portions.

The bond payment is included on your annual county tax bill. For our house, it's about $1,400 a year. But, it's different for each house/area. The bond payment tables are available on the district website.

As you can see from the replies, the decision to pay it off is a personal decision, based on your financial situation and personal comfort of carrying the obligation.

The bond set up is brilliant, 1) you pay it once a year, 2) the amount is relatively reasonable, and 3) the debt is attached to the house, not the owner. BUT
The bond is a financial obligation; it carries interest and an administrative fee.

Given 2 similar homes, a bond balance is ONE item a buyer will consider at purchase (we all know no 2 homes are identical). Every buyer has a list of 3 or 4 non negotiable in a house they want to buy. A bond may/may not be important.

How about my lawn service, electric bill, water bill, cable TV, cell phone, homeowner's insurance, etc?

& in my opinion, it's not opinion, it's merely the facts.

That crazy guy from Texas 30 years ago, had it right. A Flat Tax allows us to do away with 90% of the IRS & Collection Costs, is a much fairer system and revenue neutral.

I'm always amazed at the number of otherwise reasonably savvy folks, who own homes in TV and don't understand the genesis or implications of the CDD Bonds ... & it has nothing to do with "appraisers".

If you use price per square foot as a basis for comparing prices, then you had better include the bond balance in the price if you want to compare apples with apples. It's part of the price you pay.

I see the difference as...if you don't pay those bills, they will discontinue service.

I would argue the the Fire Assessment is clearly deductible since it pays for a County provided service and in most other states is just rolled into the RE taxes. Also, if you don't pay it, the County can lien and foreclose to collect.

From a Turbotax forum;
Real property taxes can be deductible, even if not ad valorem, if they provide a general community benefit and not a property-specific or "local" benefit. For example, a $50 charge per house for community ambulance service is a deductible property tax, while $50 for streetlights (that is only charged on streets with street lights) is a property-specific benefit and is not deductible.

Revised - the Maintenance fee does not fit this definition.