Home Care In Packanack Lake, NJ

Premium property values and taxes make northern New Jersey among the most expensive places to live in the United States.

Add some water, and exceptional prices grow even higher.

Much of the region's priciest residential real estate can be found on the shorelines of hundreds of lakes across northern New Jersey.

Pristine views and backyard recreation opportunities can come at a price. In some of the region's communities, the difference between owning a lakefront home and a non-lakefront home can be as much as 50 percent when taxes and association fees are taken into account.

"They go for a premium because after you get home from a long day, and you look out the window at a lake, it's very relaxing," said Len Cipkins, a real estate agent with Weichert Realtors in Morris County. "You're home, but you're in another place, too."

"In a down market, [lake properties] might only be up 25 or 30 percent," said Rick Del Guercio, president of Appraisal Systems Inc., with offices in Morris and Bergen counties. "But in an up market, it could be as high as 50 or 60 percent. If you were to hold me to an average, the difference is easily north of 40 percent."

Determining whether the higher cost of lakefront living pays off as an investment is harder to quantify. The benefits tied to personal enjoyment are largely intangible.

"People who buy lakefronts are a different breed for the most part, in my opinion," said Doug McWilliams, a longtime real estate agent and former mayor in Mountain Lakes. "They have a very pointed perspective. Water means a lot more to them than for the rest of us."

Determining lakefront value

Homes along New Jersey lakefronts almost always cost more when compared to similar homes in the same neighborhood.

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"Lakefront properties — meaning you can walk into the water, a ranch on a lakefront property — clearly there's more demand than for a ranch three miles away," said Dan Cassese, a longtime tax assessor in Parsippany.

Cassese said the trick to assessing the value of that demand for tax purposes involves some guesswork, but those guesses are the byproduct of exacting professional standards. In the end, the market determines value, he said.

"It's an extreme, educated, complicated method to come up with a market value," he said. "We also have to look at how many bathrooms, for example, and all that good stuff."

The most important metric factored by assessors, however, is not based on bathrooms or lake proximity, but the market itself, Cassesse told USA TODAY Network — New Jersey.

"We as assessors guess at the market, but the buyers make the market," he said. "The real people that create the market are the buyers and sellers. And these people that create the market ... we as assessors and appraisers use those transactions to develop a projected appraised value of the property. We look at sales and see where they are going."

Del Guerico agreed.

"If I'm looking at a property in Mountain Lakes, a 3,000-square-foot house in average condition that sold off the lake for $1 million, and two weeks later, the same type of house sold on the lake for $1.4 million, then I know you are talking about a 40 percent differential, which could really be only attributed to lakefront living," he said.

Property taxation on lakefront property

Property taxes, by New Jersey state law, are guided by the ancient principle of "ad valorum," meaning according to value.

"We tax the same way Romans taxed in ancient times, that's where the words come in, ad valorum," Cassese said. "We have to tax according to value. It's right in the state statute. You can't change that."

Property values, of course, fluctuate within lake communities based on proximity to the lake. Lakefront is premium, but lake views can also add value.

That's why assessors look at neighborhoods differently from most people to fine-tune their ad valorum directive. Parsippany, for example, has three distinct lake communities among a few dozen named developments and sections.

But the maps in Cassese's office carve Parsippany into 117 neighborhoods, based on comparable home sales he charts from year to year.

"Each neighborhood has a group of sales that happen in it over a period of time, and that establishes the market value of the neighborhood," he said.

The great equalizer in the formula is the tax base, which is the same for lakefront homes as any other residential lot in a given municipality.

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"Everybody pays the same rate," Del Guercio said, referring to a property-tax base typically expressed as a specific dollar amount per $100 of the assessed value.

So a big million-dollar home on a hill in Wayne, for example, gets a similar tax bill as a smaller, million-dollar lakefront on the township's high-ticket Pines Lake.

A market snapshot of NJ Lakes

A recent USA TODAY Network — New Jersey sample study of similar homes on or off 15 lakes in Morris, Passaic, Sussex and Bergen counties found that in many cases, lakefronts can be had for less than 10 percent more than comparable off-lake property nearby.

That study, based on assessed values, estimated market price, acreage and square footage of the home, did not factor in total improvement value of the dwelling, a key factor in valuation.

But it does show there are bargains on lakefronts, and available homes in almost any price range, depending on where you are willing to live and the type of house you need.

Adding to the sometimes large swings in the assessed values for lakefront homes is the propensity for lakefront owners and developers to add major home improvements to their dwellings, in some cases razing the old house in favor of a new one.

"People with lakefront properties tend to invest more in their homes," McWilliams said. "If you have a little more, you're going to put more into it."

Managing lake association dues

Packaged with other expenses for lakefront living are the annual dues many homeowners pay to the private lake associations that, similar to a condominium board, govern lake rules and oversee lake expenses.

Even a small association such as Lake Intervale in Parsippany, with only about 160 homes having deeded rights to the 12-acre lake, must cover an annual operating budget of about $50,000.

That figure includes about $12,000 for insurance and $8,000 in wages for lifeguards, and thousands more for lake maintenance, chemical treatments, property maintenance and equipment. About $4,000 is spent on the operation of aerators that discourage plant growth.

Annual dues in 2018 totaled $389. Like some lakes, Intervale recently amended its constitution to impose a mandatory minimum maintenance fee, amounting to $204, but the full fee must be paid for rights to use the lake and its facilities, which include a beach pavilion and tennis and basketball courts.

Dues are optional for some lakes, including Lake Parsippany, where memberships range from a single senior who pays $125 to a full family that pays $489. Lake Parsippany also offers limited membership to people outside its deeded neighborhood.

The price of lake use, even for non-lakefront association members, rises steeply in pricier lake communities, or where associations offer premium amenities. For instance, White Meadow Lake in Rockaway Township has a clubhouse in an historic mansion that offers a full bar, ballrooms and other country club-like amenities. Mandatory dues in 2018 are $685.

There is an additional $100 registration fee for new homeowners and a separate $750 "Equalization Fund Fee" for new homeowners, or when a new home is built.

Packanack Lake in Wayne has a first-year fee of $1,200 followed by annual dues that range from $430 for a single to $835 for a family of five or more.

The sticker shock rises in more exclusive neighborhoods. Lake Valhalla in Montville has an initial $6,000 fee followed by annual dues and add-on fees that can run $2,000 or more for the country club-level amenities.

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Finite market for lakefront

Some real estate professionals will point to lakefront sales as a specialty, but few commit to it as an exclusive niche.

"It's a much more finite product," McWilliams said, estimating only about 20 percent of the homes in Mountain Lakes are on a lake.

Maryanne Elsaesser, broker-associate at Special Properties Real Estate Services in Franklin Lakes, says the upscale lakefront market is not enough to support a high-volume sales team like hers.

"Around here, there's not enough turnover in any one specific area. You really want balance in the real estate business," Elsaesser said. "You want to cover all of it, because the market shifts. Sometimes the higher ends sells better, sometimes the lower end sells better."

If she focused exclusively on lakefronts, "We'd be out of business," she said.

Aside from the inventory issue, lakefronts only fill the needs of a certain market segment, which Elsaesser said she sees as belonging to a niche.

She described her typical lakefront buyers as "45-plus," and "looking for a view.

"They look for a destination that they can go to after work to unwind," she said. "More like a luxury experience to entertain, and family and friends to enjoy."

All things being equal, an investment in lakefront property is as safe as any other home investment, with a constant added perk of desirability, said Cipkins of Weichert.

"Lakefront properties in my experience are very desirable, and sell quickly," he said.

Staff Writer William Westhoven: 973-917-9242; [email protected]

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