A Home on My Block Just Sold for a Bundle. Here's Why That Worries Me

When a home nearby sells at a higher price, it could have negative consequences.

I live on a small cul-de-sac with five houses. Unlike most of the homes in my town, which were built long ago, the homes on my block are only 12 years old and were sold as new construction. In fact, when my husband and I purchased our home, we got to watch it get built from the ground up and customize its features to meet our taste.

Since the homes on my block are among the newest in my town, they're also assigned the highest property tax bills in town. That's actually a combination of the newness factor and also that they're a bit larger than the typical home where I live.

Recently, neighbors of ours decided to sell their home, and they got a great offer for it. That's not surprising given the way home values have soared on a national level. While I'm happy for my neighbors, the news isn't great for me.

Higher home values in the area can be a bad thing

If I were looking to sell my home right now, I'd be thrilled that my neighbors' home sold for so much money -- because it would mean that I, too, would likely get to command a high purchase price. (For context, our homes are pretty similar on the inside and have the same square footage.) But I'm not looking to sell my home. And now, I'm facing a higher property tax bill because of the high sale price my neighbors received.

When you buy a home, you don't just have to keep up with your mortgage payments. You also have to pay property taxes. Those are calculated by taking your home's assessed value (the value it could sell for today) and multiplying it by your local tax rate.

Home assessments are based on different factors, like the condition of your home and the size of it. Homes can get assessed every year or every few years, depending on your town.

Where I live, homes are assessed on an annual basis. One factor that goes into assessments is comparable sales. That refers to similar homes nearby that were recently sold.

Now, remember how I said that there aren't too many new construction homes in my town? Well, because of that, my town assessor is going to take the sale of my neighbor's home under consideration when coming up with my next assessment. Since that home sold at such a high price, there's a good chance my home's assessed value will rise. Once that happens, my property taxes will follow suit.

That's not a great thing, because my property taxes are quite high already. Having them rise even further will be a strain on my budget.

Getting ready for higher property taxes

Thankfully, my home has already been assessed for the upcoming tax year, so if my property taxes rise due to the sale of my neighbor's home, that won't happen for another year. That means I have time to prepare for that possibility, and my intent is to pad my savings account in anticipation of a property tax hike.

Of course, a lot of homeowners are seeing their property taxes rise now that home values are up across the board. If you own a home and have a lot of properties in your neighborhood that recently sold at high prices, you may want to brace for a property tax increase yourself -- and save for one accordingly.