Property Tax question

[jeeman]

Hi,

We are purchasing a property at about 80% of the property’s currently assessed value. On the HUD statement, taxes being prorated and collected by the escrow is based on the current property tax rate.

When it comes time to pay the city in April, will that tax bill be 1% of our lower purchase price, or will it be at the current property tax amount that the sellers owe?

I can’t seem to find any info on this online, and the escrow firm was hesitant to tell me anything definitive.

Jeeman

[SD Realtor]

Hi Jeeman

Escrow does not ever pay the property taxes. Rather escrow always uses the assessed value on record at the county, and will prorate the closing statements for the buyer and seller accordingly in the forms of debits or credits.

This can be problematic because when you get your bill in April, that assessed value will not correlate to the prorations that escrow calculated because they use whatever is on record.

This makes it tough for escrow companies to give definitive answers when assessed values are in a state of greater flux. We run into these sorts of problems alot because of the flips we do. Since escrow only credits/debits the buyer and seller, in one case we had a fairly large discrepancy in one of our transactions. In essence we had escrow write a letter to the buyer and the buyer actually sent the difference back to escrow that then conveyed to us as sellers.

In your case it is you the buyer but the same problem still exists. Now the county will most likely send you the second installment since it occurs in a few days but not late til 4/10 and it should be the same as the first installment which is what escrow has on record. You will then get a supplement which should be some sort of refund but… you never know.

Try calling the assessors office.

[SD Realtor]

Hi Jeeman

Escrow does not ever pay the property taxes. Rather escrow always uses the assessed value on record at the county, and will prorate the closing statements for the buyer and seller accordingly in the forms of debits or credits.

This can be problematic because when you get your bill in April, that assessed value will not correlate to the prorations that escrow calculated because they use whatever is on record.

This makes it tough for escrow companies to give definitive answers when assessed values are in a state of greater flux. We run into these sorts of problems alot because of the flips we do. Since escrow only credits/debits the buyer and seller, in one case we had a fairly large discrepancy in one of our transactions. In essence we had escrow write a letter to the buyer and the buyer actually sent the difference back to escrow that then conveyed to us as sellers.

In your case it is you the buyer but the same problem still exists. Now the county will most likely send you the second installment since it occurs in a few days but not late til 4/10 and it should be the same as the first installment which is what escrow has on record. You will then get a supplement which should be some sort of refund but… you never know.

Try calling the assessors office.

[SD Realtor]

Hi Jeeman

Escrow does not ever pay the property taxes. Rather escrow always uses the assessed value on record at the county, and will prorate the closing statements for the buyer and seller accordingly in the forms of debits or credits.

This can be problematic because when you get your bill in April, that assessed value will not correlate to the prorations that escrow calculated because they use whatever is on record.

This makes it tough for escrow companies to give definitive answers when assessed values are in a state of greater flux. We run into these sorts of problems alot because of the flips we do. Since escrow only credits/debits the buyer and seller, in one case we had a fairly large discrepancy in one of our transactions. In essence we had escrow write a letter to the buyer and the buyer actually sent the difference back to escrow that then conveyed to us as sellers.

In your case it is you the buyer but the same problem still exists. Now the county will most likely send you the second installment since it occurs in a few days but not late til 4/10 and it should be the same as the first installment which is what escrow has on record. You will then get a supplement which should be some sort of refund but… you never know.

Try calling the assessors office.

[SD Realtor]

Hi Jeeman

Escrow does not ever pay the property taxes. Rather escrow always uses the assessed value on record at the county, and will prorate the closing statements for the buyer and seller accordingly in the forms of debits or credits.

This can be problematic because when you get your bill in April, that assessed value will not correlate to the prorations that escrow calculated because they use whatever is on record.

This makes it tough for escrow companies to give definitive answers when assessed values are in a state of greater flux. We run into these sorts of problems alot because of the flips we do. Since escrow only credits/debits the buyer and seller, in one case we had a fairly large discrepancy in one of our transactions. In essence we had escrow write a letter to the buyer and the buyer actually sent the difference back to escrow that then conveyed to us as sellers.

In your case it is you the buyer but the same problem still exists. Now the county will most likely send you the second installment since it occurs in a few days but not late til 4/10 and it should be the same as the first installment which is what escrow has on record. You will then get a supplement which should be some sort of refund but… you never know.

Try calling the assessors office.

[SD Realtor]

Hi Jeeman

Escrow does not ever pay the property taxes. Rather escrow always uses the assessed value on record at the county, and will prorate the closing statements for the buyer and seller accordingly in the forms of debits or credits.

This can be problematic because when you get your bill in April, that assessed value will not correlate to the prorations that escrow calculated because they use whatever is on record.

This makes it tough for escrow companies to give definitive answers when assessed values are in a state of greater flux. We run into these sorts of problems alot because of the flips we do. Since escrow only credits/debits the buyer and seller, in one case we had a fairly large discrepancy in one of our transactions. In essence we had escrow write a letter to the buyer and the buyer actually sent the difference back to escrow that then conveyed to us as sellers.

In your case it is you the buyer but the same problem still exists. Now the county will most likely send you the second installment since it occurs in a few days but not late til 4/10 and it should be the same as the first installment which is what escrow has on record. You will then get a supplement which should be some sort of refund but… you never know.

Try calling the assessors office.

[SK in CV]

I have to disagree with SD Realtor. When lenders require it (which is almost always) escrow does pay property taxes when escrows close and property taxes are due. 1st installments are due 11/1 and delinquent if not paid by 12/10, 2nd installments are due 2/1, delinquent if not paid before 4/10. They lien on the due dates. So most months, taxes will not be paid, only prorated, but if they are upaid from 11/1 to 12/10 and 2/1 to 4/10 they will be paid directly from escrow.

So if you close after 2/1 but before 4/10, and property taxes haven’t been paid, escrow will pay it, but from the sellers funds, not yours. (At least that’s usually the way they do it, because it will technically have liened against the seller.) You will have a precise prorate of the actual tax bill which is due on 4/10.

Between July 1 and November 1, taxes may be estimated because they have not yet liened, and the precise amount may not be known (though the estimates are usually pretty good.) That estimate will be based on the previous assessed value. If the new assessed value is less, you’ll get a refund and a negative supplemental tax bill.

[SK in CV]

I have to disagree with SD Realtor. When lenders require it (which is almost always) escrow does pay property taxes when escrows close and property taxes are due. 1st installments are due 11/1 and delinquent if not paid by 12/10, 2nd installments are due 2/1, delinquent if not paid before 4/10. They lien on the due dates. So most months, taxes will not be paid, only prorated, but if they are upaid from 11/1 to 12/10 and 2/1 to 4/10 they will be paid directly from escrow.

So if you close after 2/1 but before 4/10, and property taxes haven’t been paid, escrow will pay it, but from the sellers funds, not yours. (At least that’s usually the way they do it, because it will technically have liened against the seller.) You will have a precise prorate of the actual tax bill which is due on 4/10.

Between July 1 and November 1, taxes may be estimated because they have not yet liened, and the precise amount may not be known (though the estimates are usually pretty good.) That estimate will be based on the previous assessed value. If the new assessed value is less, you’ll get a refund and a negative supplemental tax bill.

[SK in CV]

I have to disagree with SD Realtor. When lenders require it (which is almost always) escrow does pay property taxes when escrows close and property taxes are due. 1st installments are due 11/1 and delinquent if not paid by 12/10, 2nd installments are due 2/1, delinquent if not paid before 4/10. They lien on the due dates. So most months, taxes will not be paid, only prorated, but if they are upaid from 11/1 to 12/10 and 2/1 to 4/10 they will be paid directly from escrow.

So if you close after 2/1 but before 4/10, and property taxes haven’t been paid, escrow will pay it, but from the sellers funds, not yours. (At least that’s usually the way they do it, because it will technically have liened against the seller.) You will have a precise prorate of the actual tax bill which is due on 4/10.

Between July 1 and November 1, taxes may be estimated because they have not yet liened, and the precise amount may not be known (though the estimates are usually pretty good.) That estimate will be based on the previous assessed value. If the new assessed value is less, you’ll get a refund and a negative supplemental tax bill.

[SK in CV]

I have to disagree with SD Realtor. When lenders require it (which is almost always) escrow does pay property taxes when escrows close and property taxes are due. 1st installments are due 11/1 and delinquent if not paid by 12/10, 2nd installments are due 2/1, delinquent if not paid before 4/10. They lien on the due dates. So most months, taxes will not be paid, only prorated, but if they are upaid from 11/1 to 12/10 and 2/1 to 4/10 they will be paid directly from escrow.

So if you close after 2/1 but before 4/10, and property taxes haven’t been paid, escrow will pay it, but from the sellers funds, not yours. (At least that’s usually the way they do it, because it will technically have liened against the seller.) You will have a precise prorate of the actual tax bill which is due on 4/10.

Between July 1 and November 1, taxes may be estimated because they have not yet liened, and the precise amount may not be known (though the estimates are usually pretty good.) That estimate will be based on the previous assessed value. If the new assessed value is less, you’ll get a refund and a negative supplemental tax bill.

[SK in CV]

I have to disagree with SD Realtor. When lenders require it (which is almost always) escrow does pay property taxes when escrows close and property taxes are due. 1st installments are due 11/1 and delinquent if not paid by 12/10, 2nd installments are due 2/1, delinquent if not paid before 4/10. They lien on the due dates. So most months, taxes will not be paid, only prorated, but if they are upaid from 11/1 to 12/10 and 2/1 to 4/10 they will be paid directly from escrow.

So if you close after 2/1 but before 4/10, and property taxes haven’t been paid, escrow will pay it, but from the sellers funds, not yours. (At least that’s usually the way they do it, because it will technically have liened against the seller.) You will have a precise prorate of the actual tax bill which is due on 4/10.

Between July 1 and November 1, taxes may be estimated because they have not yet liened, and the precise amount may not be known (though the estimates are usually pretty good.) That estimate will be based on the previous assessed value. If the new assessed value is less, you’ll get a refund and a negative supplemental tax bill.

[Eugene]

For the time being, you’ll be paying the property tax based on the previous value. Some time next year, possibly in the summer, you’ll get a refund check from the tax assessor based on the difference between what you did pay in taxes and what you should have paid if the house were reassessed in time.

Once the tax assessor comes around to reassess your house, you’ll may need to contact the escrow company and tell them to reduce the amount they collect from you every month.

[Eugene]

For the time being, you’ll be paying the property tax based on the previous value. Some time next year, possibly in the summer, you’ll get a refund check from the tax assessor based on the difference between what you did pay in taxes and what you should have paid if the house were reassessed in time.

Once the tax assessor comes around to reassess your house, you’ll may need to contact the escrow company and tell them to reduce the amount they collect from you every month.

[Eugene]

For the time being, you’ll be paying the property tax based on the previous value. Some time next year, possibly in the summer, you’ll get a refund check from the tax assessor based on the difference between what you did pay in taxes and what you should have paid if the house were reassessed in time.

Once the tax assessor comes around to reassess your house, you’ll may need to contact the escrow company and tell them to reduce the amount they collect from you every month.

[Eugene]

For the time being, you’ll be paying the property tax based on the previous value. Some time next year, possibly in the summer, you’ll get a refund check from the tax assessor based on the difference between what you did pay in taxes and what you should have paid if the house were reassessed in time.

Once the tax assessor comes around to reassess your house, you’ll may need to contact the escrow company and tell them to reduce the amount they collect from you every month.

[Author]

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