11 months of pre-paid taxes at Closing?!

Status: Open
May 17, 2017 Views18,459 Answer a Question

The title company I'm forced to use because I'm purchasing a house from a builder, is claiming I need 11 months of taxes at closing! The house will be completed in August in Katy which means 27K in pre-paid! Is the title company correct?

If this is correct then at what point will I get this money back? Would I get the money back after the first year?

The 27k seems to be based on the purchase price of the house but I would think that part of the assessed property value would be on the undeveloped Land. Thus, I would only need to pay only 5 months for the value of the land and 6 months for the value of the house + land.

Asked by
Consumer
Categories:
Property Taxes
About 5 years ago
I’m in a similar situation and cannot get a straight answer from anyone. Just bought a new constriction home June 26th, 2018. As a part of closing I paid 10 mos of property taxes to be impounded into escrow. The amount paid was for the appraised value even for the months the house was not fully built from January to June. The builder has reimbursed their portion of the property tax in the time period on the closing statement as a deduction, but the lender still impounded 10 mos and will also start collecting the normal monthly amount for escrow as well starting August. I feel like I’m definitely overpaying the property tax in escrow, if calculated, I will have paid a full year of property taxes for the appraised value in my first year, even with the builder credited property tax for the land value property tax for that time period. Did you end up getting any sort of refund after your tax bill was released for the first year?
About 6 years ago
Sorry to hear what happen. Typically the pre-paid tax is an estimate. If the actual appraised value (and subsequent tax) is lower, you can go back to Seller and have him/her pay back the difference.
About 6 years ago
Hi Keith,

Always tricky on new construction and setting up those escrow accounts for taxes. In August, you would need to be putting in 11 months (Jan-Aug is 8 months plus 3-month buffer). So at the end of the year, you would have 12 months of taxes to pay those property bills plus a 3-month buffer.
Not the "tricky" part. I would bet your home was just a dirt lot January 1st. That is when the county accesses the value of the property. Likely your tax bill in December will be based on dirt value, not a full home. And if you're setting up escrow accounts based on the sales price, you will have too much money in there come December..but only for this first year. After that, the bill will be much higher.
Get with the lender and discuss how this works. If you can get them to set up your escrow account based on dirt value, you will bring less money to closing. But be prepared for the big bills the following year once the true value is set up with the county tax accessor. Good luck.

Mark McNitt
832-567-4357
www.MarkKnowsHouston.com
Bernstein Realty
About 6 years ago
Tax valuation in Texas is based on Value as of January 1, of the tax year. If there was no improvements on the property, the current tax liability would only be on the "appraised" value of the real property, not the sales price. I'm shocked at the advice you were given by these "professionals" and that value is public record at the appraisal district
About 6 years ago
Dear Keith,

In short the builder will use their own forms and documentation for the sales process. Remember that you are their customer not their client.
The taxes will need to be prepaid, and while you will be credit for them you will not get them back.

I am available to fight and negotiate on your behalf . Remember you are my client, and to the builder you are a customer.

Call me for a no cost obligation,

Get in touch with me and I will make sure that we find the perfect home for your needs.

Dominik Szabo
Brockway Realty L.L.C.
(832) 844 1724
DominikRealtor.com
** The Doctor of Real Estate in Houston Texas **
" Professional, Courteous, and Informed "
About 6 years ago
Hi Keith,

An answer will depend on what form was used and when closing it to take place. A TREC (Texas Real Estate Commission) New Construction (23-14) form should be used, but the builder may have their own form drawn up by an attorney. If the form used contains language below, you should receive a credit for for taxes to closing date if they were not paid. If the taxes were paid before closing, then you would owe from closing to the end of the year. It is your right to receive a full disclosure of all costs. Ask the title company for Settlement Statement, even if it is a preliminary one so you can see what charges and credits they are processing.


13.PRORATIONS AND ROLLBACK TAXES:

A. PRORATIONS: Taxes for the current year, maintenance fees, assessments, dues and rents will be prorated through the Closing Date. The tax proration may be calculated taking into consideration any change in exemptions that will affect the current year's taxes. If taxes for the current year vary from the amount prorated at closing, the parties shall adjust the prorations when tax statements for the current year are available. If taxes are not paid at or prior to closing, Buyer will be obligated to pay taxes for the current year.

B. ROLLBACK TAXES: If additional taxes, penalties, or interest (Assessments) are imposed because of Seller’s use or change in use of the Property prior to closing, the Assessments will be the obligation of Seller. Obligations imposed by this paragraph will survive closing.

Please feel free to call me to discuss your situation. I would be happy to help.

Michael Jobin
C&K Properties
713.545.2314
source:
https://www.trec.texas.gov/sites/default/files/pdf-forms/23-14.pdf\nhttps://portal.hud.gov/hudportal/documents/huddoc?id=1.pdf
Disclaimer: Answers provided are just opinions and should not be accepted as advice.
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