Jeff Merrill | Sioux Falls Realtor

By Jeff Merrill | September 5, 2026

You’ve done your homework. You know the price, you’ve budgeted for closing costs, and you have a number in your head for the monthly payment.

Then, a few weeks after you close on that brand-new home in Tea or Harrisburg, a letter arrives from the city. It’s a bill for several thousand dollars in special assessments — for the street your house sits on.

That’s the surprise nobody warns first-time and move-up buyers about. And in a metro building as fast as this one, it lands on more new-construction buyers than you’d think. Here’s how special assessments actually work here, and how to make sure you’re never the one opening that letter.

What a Special Assessment Actually Is

When a city builds infrastructure that benefits certain properties directly — paving a new street, running a water main, installing sanitary and storm sewer to a fresh subdivision — it doesn’t always spread that cost across every taxpayer in town. Instead, it charges the specific properties that got the benefit. That charge is a special assessment.

South Dakota municipal law lets cities do this, and Sioux Falls uses it constantly to fund growth without piling every dollar onto the general property tax levy. The city adopts what’s called an assessment roll — a document listing each affected parcel and the amount owed — and once it’s filed, the owners of those parcels get a letter in the mail for their share.

The key thing to hold onto: this is not your property tax. Your annual property tax pays for schools, city services, and the county. A special assessment is a separate charge for a specific improvement tied to your lot. You can owe both at the same time, and they show up as different line items.

Assessments cover two broad buckets. The big ones are the infrastructure assessments — streets, water, and sewer on new development — which can total thousands or tens of thousands per lot. The small ones are annual maintenance items the city bills to specific properties, like sidewalk repair, tree trimming, or snow removal, which the Sioux Falls City Council approves as a routine assessment roll every year. It’s the big infrastructure kind that catches home buyers off guard.

Why New-Construction Buyers Get Hit Hardest

Resale buyers usually dodge this. On an established home in central Sioux Falls or an older Brandon neighborhood, the streets and utilities were assessed and paid off years ago. The cost is long gone.

New construction is a different story. When a builder or developer opens ground on a subdivision in northwest Sioux Falls, Tea, or Harrisburg, someone has to pay for the streets, curb and gutter, and utility mains that make those lots buildable. Often the city fronts that cost and assesses it back against the new lots — the very lots that become the homes you’re touring.

So when you buy that new build, the assessment may still be outstanding. Two things can happen. The builder pays it off before or at closing and rolls the cost into the sale price. Or the balance transfers to you, and you inherit the remaining installments.

This is exactly why working with your own representation on a new build matters so much — the builder’s on-site rep works for the builder, not for you, and confirming the assessment status is the kind of detail that protects your wallet. I walk through that dynamic in my guide to whether you need a Realtor for new construction in Sioux Falls. It also feeds directly into the new construction versus resale decision — an outstanding assessment can quietly narrow the price gap between a new build and a comparable existing home.

How to Find Out What You Owe Before You Buy

You have four ways to nail this down, and you should use more than one.

Start with the seller’s disclosure. South Dakota’s Seller’s Property Condition Disclosure Statement (SDCL 43-4-44) asks the seller to disclose known special assessments. On a resale, read that section closely. On new construction, the builder may hand you a different disclosure — ask the direct question in writing anyway.

Second, ask the city or county for the parcel’s actual balance. The City of Sioux Falls Finance and Public Works offices track assessment rolls, and the county treasurer collects the certified installments along with property taxes. You can request the outstanding balance and a payoff figure for a specific parcel.

Third, lean on your title company. In South Dakota you close through a title company, not an escrow company, and its title search turns up certified assessments recorded against the property. Ask specifically whether the search caught any special assessments, certified or pending.

Fourth, and most important on a new build: ask the builder point-blank whether the streets, water, and sewer assessments are paid in full or outstanding, and get the answer in writing. Don’t accept “it’s included” verbally. Have it stated in the purchase agreement.

One trap to watch: the difference between a certified assessment and a pending one. A certified assessment is already on the books and easy to find. A pending assessment is for work that’s done or planned but not yet certified — it may not show up cleanly in a search, and it can land on you months after closing. Always ask directly whether any pending assessments exist for the parcel.

Who Pays, and How to Handle It in Your Offer

There’s no law dictating who pays an outstanding assessment. It’s negotiable, and it gets decided in the purchase agreement — so this is a conversation to have before you write, not after.

If a balance is outstanding, you have two levers. You can ask the seller or builder to pay it off at closing, which many builders will do because they’ve already priced it in. Or you can knowingly take over the remaining installments, which lets you spread the cost over years instead of paying it all at once.

That installment option is worth understanding. When an assessment is certified, you can usually pay it in full or let it amortize over a set term — commonly up to 10 years — with interest accruing on the unpaid balance. The annual installment then gets collected with your property taxes. In South Dakota, that assessment installment is due before May 1 each year and isn’t split into two halves the way your regular property tax bill is. So budget for it as a once-a-year hit, not a monthly one.

Two more Sioux Falls specifics to keep straight. An assessment is not the same as HOA dues — plenty of new subdivisions have both, and they cover completely different things, which I break down in my post on HOA fees and covenants in Sioux Falls. And an outstanding assessment is a cost that stacks on top of your down payment and buyer closing costs in Sioux Falls — factor it into your total cash-to-own number, not just your price.

Frequently Asked Questions

Do you pay special assessments and property taxes both?
Yes. They’re separate charges. Your property tax funds schools, city, and county services. A special assessment is a distinct charge for a specific public improvement — a street, water main, or sewer line — that benefits your particular property. You can owe both at once, and they appear as different line items.

How much are special assessments on a new home in Sioux Falls?
It depends entirely on the improvements assessed to your lot. Small annual maintenance assessments might be a few hundred dollars, while streets, water, and sewer on a new subdivision lot can total from a few thousand up to $15,000 or more. Always request the exact balance for your specific parcel from the city or county rather than relying on an estimate.

Can special assessments be paid off early?
Usually, yes. Once an assessment is certified, you can typically pay the full outstanding balance at any time instead of carrying the annual installments and the interest that accrues on the unpaid amount. Ask the city or county treasurer for a current payoff figure.

How do I check if a Sioux Falls property has special assessments?
Use the seller’s SDCL 43-4-44 disclosure, request the parcel’s balance from the City of Sioux Falls or the county treasurer, and have your title company confirm what its search found. On new construction, ask the builder directly, in writing, whether the assessments are paid off or outstanding — including any pending ones.

Who pays outstanding special assessments at closing?
It’s negotiable and decided in the purchase agreement. The seller or builder can pay the balance at closing, or you can agree to take over the remaining installments. On new construction, builders often pay it off and fold the cost into the price — but confirm it in writing rather than assuming.

About Jeff Merrill: Jeff Merrill leads The Jeff Merrill Team, powered by eXp Realty, serving Sioux Falls and the surrounding South Dakota communities of Brandon, Harrisburg, Tea, Madison, Mitchell, Canistota, and beyond. Jeff brings a direct, no-hype approach to helping buyers and sellers make confident decisions in every market.