Each industry comes with a vocabulary of its own, and in real estate, some of that vocabulary is downright confusing. So, if you find yourself stumped by lingo, jargon, or acronyms, you’re not alone. One of the most confusing words in the real estate industry is “abatement.”
In legal terms, to abate means to remove, lessen, or diminish a thing. In residential real estate, however, abatement has both positive and negative connotations. Here is a short primer on what you need to know.
Property tax abatement – the positive view
Most often to home buyers, the term abatement applies to a property tax abatement. Property taxes are ongoing, annual homeowner expenses, even when you own your home outright, so the ability to access an abatement means valuable savings to homeowners. When a state, county, city, or other taxing entity offers homeowners an abatement, it means a tax reduction during the years of the abatement. Specific reductions apply to all homes in a location, while other abatements apply to specific homes that meet certain criteria for one-time improvements, upgrades, or enhancements.
Some abatements could be for installing environmentally friendly additions or upgrades such as solar panels or green-technology roofing materials. Others apply to renovations that increase both your own property's value and the value of the area. This type is true for many areas under redevelopment. Other abatements might apply to convert ware-housing or other industrial or commercial areas into residential housing or low-income housing.
Of course, all improvements must conform to the abatement's requirements, permits, and local codes, so make sure you know all the information about an abatement before relying on it as part of a purchase.
Property tax abatements may make qualifying for a mortgage easier since it reduces the income/debt to housing cost ratio. It can also be a selling-point as long as it is still in force when you choose to sell your home.
Asbestos and lead abatement – negative consequences
In a twist of the English language, the potentially negative use of abatement is the requirement to remove or mitigate exposure to asbestos and lead. If you purchase an older home, particularly one built before 1978, or conversions from commercial to residential use, all renovations must conform to modern lead-free paint, lead-free plumbing, and asbestos-free insulation, siding, roofing, and ceiling materials requirements. Prior to the 70s lead solder joint in pipes and lead ingredients in paint were common, but since children tend to put paint chips in their mouths, and since drinking water flows through those lead pipes, the Environmental Protection Agency requires it to be removed or completely sealed. Asbestos used as insulation around ducts and pipes or vermiculite attic insulation, or in wall, flooring or ceiling materials requires removal by certified professional asbestos removers.
Let your real estate professional help you determine if the home you're considering buying falls in either of these abatement categories.
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