Published by Jeremy. Last Updated on July 5, 2022.
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Looking at Pittsburgh real estate is fun, isn't it?
Okay, we know it isn't. In fact, buying a house in Pittsburgh can be downright awful in terms of finding a location, price, and condition that matches your budget- all while being able to negotiate a deal in the hot marketplace.
In this one we wanted to share some of our thoughts after our recent house buying experience in hopes that it may help others moving looking to do the same!
Note: Figures noted below are relative to the City of Pittsburgh and Allegheny County. Those who live in a different city and/or different county may have different rules and rates to keep in mind. Likewise, we are not realtors, tax professionals, or affiliated with the real estate market in any way, shape, or form. This article is anecdotal based on our experience of buying a house in the city only. When in doubt, please ask questions to a licensed realtor or tax professional for official rules and regulations.
The Pittsburgh Real Estate Market is in Demand
Pittsburgh is a city that is overwhelmed with ‘best of' list features. We're often named the most livable, a top food city, most in-demand for [x, y, z]- you name it.
If there is a list out there about top cities in the USA, with good connotations at least, odds are that Pittsburgh is on it.
But in practical terms, what does this mean? Well, to put it bluntly, Pittsburgh homes for sale are in demand.
We may not be growing in population as of yet, but the number of people who are buying houses certainly appears to be on the rise, and competition for housing is tough (and that is an understatement).
To paint a picture of the Pittsburgh real estate scene, we really have to break it up into brackets based on house value. Note that the following are our personal thoughts and experience based on searching for houses in the city limits, and are not reflected in actual data (and may vary significantly by neighborhood):
- Houses Under $150,000 – Will require a lot of repair work if not a complete gut job, and are few and far between.
- Houses $150,000 to $300,000 – Will likely require some repair work, are highly sought after, and sell within hours or days of going on the market.
- Houses $300,000 to $500,000 – Less in demand, more move-in ready with only personal modifications necessary, and generally last for a few weeks to months on the market.
- Houses Over $500,000 – Move in ready, possibly over-priced depending on size and location, will generally be on the market for a while pending the neighborhood.
Ignoring the two extremes, as their issues are readily apparent, the one range we really want to touch base on is for houses in the $150,000 to $300,000 range as these are hot commodities in Pittsburgh's market.
In our experience houses in this price range, regardless of how much work needs to be done on them, get snapped up quickly.
When we bought our house, we've looked at some that were considered “move-in ready” for around $200,000 and during the open house were told had four offers pending and we'd have to make an offer that day if we wanted to be considered (we didn't). Others don't even get to the open house as offers are made within days (if not hours) after going on the market.
Likewise, on the lower end towards $150,000 houses will require a fair bit of work, but also get snatched up by house flippers fairly quickly (another problem that plagues this city is the abundance of poorly flipped houses for sale for a quick profit).
To put it simply, if your budget is pushing you into the sub-$300,000 range in Pittsburgh you will benefit by knowing what you want, being flexible to see houses the minute they go on sale (and have a good realtor who spots them on your behalf), and are willing to act immediately to get in before others who certainly will.
We were thankful to be in a higher bracket when purchasing our home and had a bit more flexibility in considering our options- but we certainly saw how cut-throat the lower priced tier was and is something all home buyers in the city have to be aware of.
Financing, Fees, and Closing in Pittsburgh
Once you have found your dream home, and have an offer accepted, the true fun begins with banking approvals, inspections, closing, and so on.
When it comes to closing costs, it is often quite tricky to accurately determine the amount of money you need on hand (in any market), and in Pittsburgh this is no different. There is your down payment, which a minimum of 5% is typical for most conventional loans, and then there is also a plethora of closing costs that typically are not talked about.
Your realtor or real estate attorney should be able to provide a breakdown of all closing costs for your price ranges and chosen house; however, it is worth keeping in mind that there are many added fees such as the appraisal, credit report, flood certificates, escrow fees, notary fee, attorney fee, title insurance, title transfer tax (more on this below), prepays for your insurance and annual taxes, and more.
On a $250,000 house, a good rule of thumb is to expect this to be around 5%- or about $12,500 required in addition to your down payment. So on that same $250,000 house if you put down 5% in cash you'll need more like 10% to close after all fees are accounted for. (This is our rough estimate only.)
2.5% of this comes from a title transfer tax, which for the City of Pittsburgh in 2020 is 5% of the house value that is split 50/50 between the buyer and the seller. When it is all said and done, this is one of the biggest contributors to the amount of your closing cost and is something some realtors have been guilty in omitting when discussing with clients.
To lower the costs you need at closing, you may want to inquire about a seller's credit (or seller's assist) to increase your financed price of the house and receive an equal credit by the seller for closing costs.
The exact value of this has been on contention depending on the agency you use as the laws are a bit unclear, so it is hard to give a maximum amount you can get assisted. Ours tried to get closer to 5% and was denied despite doing so for years, and we ended up with closer to 3% on what was likely a fluke.
For example, let's say you've made a deal for a house at $250,000 and the seller has agreed to give you a 3% seller's assist ($7,500) above the price of your sale amount. Instead of financing $250,000 you'll finance $257,500 (minus down-payments), and at closing $7,500 of the fees you would've paid in upfront are now paid by the seller on your behalf (and you finance it over the life of your loan).
So if you put 5% down and had roughly 5% in closing costs, the $25,000 you would've needed to close is now down to $17,500.
The only real downside to this is that you're now financing $7,500 more versus paying that out-of-pocket up front, so your monthly payments will go up slightly (and you'll be paying interest on that money, too). But with the trade-off being that your out-of-pocket cost is $7,500 less, it could make a world of difference into getting into your preferred house right away.
There are some other nuances to this law that is best to talk about with your realtor, such as your house having to appraise for that higher value ($257,500 instead of $250,000); however, we are noting it as it is something that is often overlooked as a way to decrease your down payment a fair bit upfront.
Tax Re-Appraisals Will Come
After closing, the next biggest question most everyone has is reappraisal for tax purposes, and this can occur in one of two ways:
- The city and/or county does a blanket re-evaluation of all homes (rare).
- The school district requests an adjustment of your house after they find out it's been sold at a higher value (more common).
Generally speaking, the city/county has very loosely done blanket re-adjustment for tax purposes, and it is fairly common to find houses purchased 10, 20, or even 30 years ago still taxed on their purchase price.
This is great news for buyers, as odds are good that your taxes will not change in the years and decades to come after its first adjustment. However, the local school board is quite aggressive in pushing spot readjustments on sales after they're notified of your purchase, so odds are good you'll have one solid jump at the beginning before the long period of silence commences.
This information is sadly not talked about all too often, and many banks and realtors will often tell you an estimated monthly mortgage payment based on current taxes- not future taxes at sell price.
If you bought that $250,000 house referenced above and it was recently sold for $200,000, at an overall millage rate of roughly 22 (Pittsburgh's millage rate), your tax increase may be about $91 a month beyond what you are paying in the first months after closing.
- Example calculation: $50,000 value gain at $22 tax per $1,000 of house value per year. $1,100 in additional tax per year, or $91.66 per month.
But if your $250,000 house was last sold for $75,000 and is still appraised as such, your tax rate may go up over $320 a month (likely a 20% increase in your monthly mortgage)!
- Example calculation: $175,000 value gain at $22 tax per $1,000 of house value per year. $3,850 in additional tax per year, or $320.83 per month.
While no increase is desirable, the truth of the matter is that the bigger the gap in purchase price to last appraised price, the more taxes you'll likely to end up paying at some point down the road and it is often not discussed as prominently as it should be.
The downside to this entire process is that it does not follow a standard format. You do not buy your house, receive a letter the next week, and have your taxes readjusted the following month. Heck, it isn't even immediate on the day of sale (which makes far too much sense).
It could be months, weeks, or even years before your dreaded letter arrives. From there, you can either lie back and accept it (with taxes generally getting calculated based on your purchase price) or choose to fight the school board via a lawsuit to achieve a lower settled value.
Ignoring all ethical reasons for or against the lawsuit option, it does work, and a search of assessed house prices vs last sold price will show some fairly striking discrepancies.
One neighbor may be assessed at 60% of the last purchase price, another may be at 90% of purchase price, and others may be 100% of purchase price- and therein lies the problem. Maybe some got lucky during reassessment, maybe others sued an won while some sued and lost.
But when it comes down to it, this inconsistency makes predicting your final assessment quite tricky when looking for a house.
Whether you choose to fight the adjustment is up to you, but when purchasing a house you should always keep in mind that taxes easily could end up being assessed based on the total purchase price of your home. Your current monthly rate at closing is, in lack of any better term available, at a discount.
Is it unfair? Yes. Is it a poor way of doing things? Certainly. But this is what we've got and home buyers in the city and region need to be aware of it now to prevent any shock later.
So check out the city, county and school district tax websites, do the math, and determine how much more you are able to afford prior to buying a house as this one has come as a shock to many residents after purchasing a home!
Doing Work? Thumbtack is Fine, Neighbor Recs are Better
So when it is all said and done and you've got a house, what do you do if you need work?
Well, we're big of Thumbtack for finding local contractors who are willing to do work. But to be honest nothing beats a neighbor recommendation in person or from an online Facebook community group.
Most people “have a guy” for any given project, and it takes some digging to find out a good recommendation. Solid contractors are few and far between, and we've known some people to keep their's fairly close, but by asking around in neighborhood groups you may often find one that is worth far more than 3rd party apps like Thumbtack!
Best of luck in your house search!
Please keep in mind we are not realtors nor licensed professionals, and this post is an observation based on our experience of buying a house in Pittsburgh only.
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