Mortgage Updates

If you bought your home in the last 7 years you likely have reason for a property tax reduction.  In November 1978 Proposition 8 passed, amending Proposition 13 to recognize declines in value for property tax purposes. "As a result, Revenue & Taxation Code Section 51 requires the Assessor to annually enroll either a property’s Proposition 13 base year value factored for inflation, or its market value as of January 1st, whichever is less."

Somehow, this doesn't appear to be happening. Or at the very least, the downward adjustment does not seem to accurately reflect the actual decline in market values.  If you are a current homeowner you should visit your home County Assessor's website and download their list of required items and the application. 

Even IF you did receive a reduction you may not have received actual current value...  that is what makes a declining market!

If you live in Placer or Sacramento County click on the County name for the appropriate link.

If you are in the process of buying a home it is important that your lender pulls a copy of the existing tax bill.  Of course, the preliminary title report provided after escrow opens will also show current  property taxes.  My experience these last several months, belies the aggressive stance REO Asset managers have taken in demanding 30 day closings.  Most have trouble even getting escrow opened within 21 days!  That means your title report is a long time coming.  Why is this important? 

If the loan you are getting for your purchase transaction is a government loan, an impound account for property taxes and insurance will be established.  At closing any due taxes will be paid as determined by your purchase contract and extra months will be set aside based on your estimated taxes.  Lenders use the calculation of 1.25% of the sales price to estimate future tax liabilities.  This is an accepted industry wide practice by California lenders to estimate the correct amount of dollars to collect for future tax obligations.

The calculations may be correct (or mostly correct) but with a substantial lag time at the County Assessor's office it is highly unlikely that your 1st tax bill is mailed reflecting the actual purchase price of your home.  It will still reflect the higher taxes from the previous owner.  Some lenders are starting to collect for those higher taxes so that you as the buyer will not be "hit" by your servicing lender for the difference in dollars due.

If your lender is still willing to collect your actual lower annual tax premium for your impound account, you will need to be proactive.  Contact your County Assessors office and communicate directly.  If necessary provide them with a notarized copy of your closing statement, although they should have all the public record items readily available.  Then push for a confirmed date... a commitment to be sure your taxes are correct.  If an incorrect tax bill is still sent to your lender, you may be required to pony up the difference.  This is because Servicers are required to advance the money to the County.  Since this cuts into profits, you can bet that they will be eager to collect.

Be an informed buyer.  1. Check out the current owner's tax bill.  2. Contact the County as soon after closing as possible.-- The next round of property tax bills comes out in October.