What Is a MUD and How Does It Affect Homebuyers?

What’s a MUD?

A Municipal Utility District (MUD) is a special-purpose district created to develop areas that lack adequate infrastructure. Authorized by the Texas Commission on Environmental Quality, a MUD provides essential services such as water supply, utility related services, sewage and drainage. 

How Does a MUD Work?

To fund the construction of infrastructure, a MUD can issue bonds. These bonds are then repaid over time through additional property taxes levied on homeowners within the MUD. The district is governed by a board of directors appointed first by the Texas Commission on Environmental Quality, and then elected by the residents in the district. 

What Does This Mean for Homeowners?

Living in a MUD means you will have an additional tax on top of your regular property taxes. This extra tax goes towards repaying the bonds used to build the infrastructure in the MUD. When purchasing a home in a MUD, sellers are required to provide buyers with a MUD notice. This notice should be posted and available on the district's website. If it is not available online, sellers will provide the buyer with a "NOTICE TO PURCHASER OF SPECIAL TAXING OR ASSESSMENT DISTRICT" form. This is important information that must be received, as it's essential to understand what you're buying into. 

Important Considerations

Ensure that you receive the MUD notice and review with your agent to understand the specific taxes and services provided.

Research the MUD. Look into the financial health and who is governing the MUD to better understand the services and taxes.