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What’s A CDD And Why Should I Care?

moneyOK, first of all, you must be wondering what CDD stands for. In real estate, it stands for Community Development District.

Now that we have that out of the way, why should you care what a CDD is? Let me tell you so it doesn’t surprise you 8 months after you purchase your new home.

Some new homes are built in what is known as a Community Development District. The Miami Dade Property Appraiser has his own definition and a darn good one at that. It states… “The Community Development District – CDD” means a local unit of special-purpose government. A community development district may charge separate non-ad valorem special assessments for satisfying the debt obligations of the District related to financing, constructing, maintaining and servicing the District’s improvements and/or services.

If it still isn’t clear, I’ll spell it out real simply…it boils down to a larger tax bill. You will pay more money for property taxes than someone else with a home valued at the same amount but whose home is not within a CDD.

How much more? Well, that depends. It could be in the neighborhood of $800/yr to $1200/yr or more. It is totally based on the types of improvements and/or services that were constructed, financed and maintained and on the budget adopted annually by the CDD.

If you are buying a home that is part of a CDD it must be disclosed to you. However, you may have stars in your eyes as you check out that shiny new townhouse and completely gloss over the fact that this will be an additional expense on top of the mortgage, taxes, insurance and homeowners association, if any.

There are many new developments in Homestead, Cutler Bay and Miami which are in CDD’s and that impacts your monthly payment. Make sure you’re including the additional cost a CDD brings when you’re figuring out your numbers.

For instance a CDD which imposes an assessment of $984 per year is costing you $82 per month. With an extra $82 per month on a 30 year fixed mortgage with 6.5% interest rate you could afford to purchase almost $13,000 worth of extra house in a community without the extra expense of a CDD.

Make sure you’re including all of your monthly expenses when figuring out how much home you can afford.

  1. Grog Argh

    Caribe Homes and Lennar supposedly failed to disclose this CDD tax to home buyers 3+ years ago – a lawsuit from what I understand was filed by those people in the Waterstone development in Homestead – pretty sure nothing ever really came out of it – or did it? Last time I checked with some people I know who live there they are still paying it (as if they could take it away!)

  2. Maggie

    Grog, the Homestead area has quite a few CDD’s and you’re right, there’s no way they’ll ever go away. I had not heard about the Waterstone deal. I’ll have to snoop around with my connections.

    The disclosure required by law is easily satisfied by a pamphlet handed out and verbage on the contract. As big as Lennar and Caribe are, I am sure they did both.

    The problem is that no one sits anyone down and explains what it really means. I tell all my buyers up front what a CDD is. Surprises are not good. Thanks for stopping by!

  3. GrogArgh

    Well, to be more specific, the lawsuit was by Waterstone residents against Caribe Homes / Lennar – that much is a fact – it was huge controversy a few years ago because like I said, they did not disclose that information when they made those people sign the sales contract prior to building.

    I purchased a home from those developers also, but not in homestead – and I did in fact receive documentation explaining the CDD and the tax implications. I had to sign a sheet stating I was made aware of it.

    Here is one of many links regarding this apparently still brewing controversy:

    http://www.myhomesteadtaxes.com/forum/showthread.php?t=17

  4. Maggie

    Oh Grog, that is one sweet link. I Googled CDD and didn’t come up with much last week. Too bad that website is not getting more traffic. I thank you for putting it here. I am going to have to spend some time there catching up on their posts. A few years’ worth of posts will take me a while to read. It is a shame that people in the know gloss over things which make such a big difference to people down the road.

  5. Rita Taylor

    Maggie,

    I love the name of your blog! This post is a great example of how a knowledgeable agent on your side can be a big help when shopping for a home. I bet some of the buyers Grog mentioned wish they had used a good buyer’s agent when they bought their Miami home.

  6. Maggie

    Rita, thanks for stopping by. There’s a story behind the name. I need to check and make sure I posted it. =) Thanks for reading!

  7. Bob Carney

    Awesome information…your “outside” blog is looking good.

  8. Maggie Dokic

    Bob, thank you. It’s slow as molasses trying to sell real estate while at the same time trying to stay on top of your blog…but…I guess that’s old news to you!

  9. Carole Cohen

    Maggie you are informative as always. And I am so pleased you have found another blog home! We have community development neighborhoods…in fact all of our Cleveland City neighborhoods are divided into development groups.

    Now that you are ‘up and running’ it will get much easier, really! 🙂

  10. Maggie

    Hi Carole! Thanks so much for stopping by. I appreciate the visit and kind words.

  11. Jay Merton

    Broker Maggie:
    I must join the chorus—you have a fine blog here (and its joining Our Saint Paul’s Blog Roll), and have learned much from the “CroninMaster,” Grasshopper! I absolutely love your blog title. You already have a great blog-voice, so I predict this new blog will serve you well.
    Jay

  12. Maggie

    Hi Jay! You words mean a lot to me. Thank you. And thank you for the link love. It’s much appreciated! I promise to get out more when things settle down a bit. I’m plum tuckered out =)

  13. Beth Butler

    Maggie- the CDC so many buyers have no idea. This is a great first post. The blog is gorgeous!!

  14. Maggie

    Beth, thanks! A little revamping was done, can you tell? This was the first post I ever linked to on AR but I’ve been filling up this baby for a while. Wait until Star Tech comes to town. I’ll be like a zombie. =)

  15. Albuquerque Real Estate

    Maggie what a helpful post for the Miami home buyers. We don’t have CDD here but we have something similar (special assessments).

  16. Thesa Chambers

    Maggie; what a great piece of information for your local buyers – this is why I will always send you any referrals for your area – you rock Maggie – thanks for being a top notch REALTOR®

  17. Maggie

    Ashley, yes, these would be like a special assessment but there’s nothing oh-so special about them! =)

    Thesa, thank you! Your support is unwavering and appreciated.

  18. Randi Rapp

    Hey Maggie,
    Great blogsite! Congratulations 🙂

  19. Ines

    I’ve never had to deal with CDD’s but you better believe I’ll keep my ears and eyes peeled if I’m ever in South Miami…but then again…..I would refer the business to my favorite South Miami agent!

  20. Maggie

    Ines, you know where my north business is going, right? =) I was reading that there are quite a few CDD’s north of me. I need to go back and check out where.

  21. Carmen Rivero

    Hi Maggie, I have not had to deal with CDDs yet, but I do know of a couple of communities in my area that have CDDs. Sometimes it is included in the tax amount when it is being disclosed by builders. BTW, this is a cool blog, I am going to look around. See you in the rain!

  22. Jackie Colson-Miller

    Great idea for a post Maggie…we have a lot of cdd communities in Tampa. With the new “tomato toolbar” I’m working hard at reading all the news on the vine…

  23. Maggie

    Randi- ooops! I missed your comment there. Thanks for your support. =)
    Carmen- I collect CDD disclosures whenever I visit developers. Call me strange =) Thanks for stopping by!
    Jackie- well hello there! Did I miss a toolbar? I need to get with the program. I’m also way overdue for a visit to your place.

  24. IndyAgent

    Maggie – This is great info for the Miami home buyer. What many do not understand is the amount of additional home they could purchase if not for the additinal taxes and fees attached to a CDD, You have perfectly explained the consequences.

  25. Nina Gail

    Maggie, This is great information for buyers to be aware of. CDD’s have been around for ages and used successfully in many areas. However, in the height of the recent boom – many of the buyers who got caught unaware in Homestead were purchasing on the flip side of an investor transaction. It was the investor/flipper’s responsibility to disclose, because the disclosure had already been made to him as the contract purchaser.

    All the more reason people should be working with a professional Realtor who can guide them through the process and point this kind of stuff out, enabling them to make better decisions.

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These articles are not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.

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