Unimproved Property vs. Improve Property tax...

[Anonymous]

Resurrecting this thread.

When I started the process with the lender, and got all the loan disclosures (even up until a few weeks ago), the estimated tax to be included in payment and collecting 8 months of such at closing was always in the $500 range.  Fine.  I was approved with DTI no problemo.  I knew what my estimated cash to close was, etc.

Yesterday I get an updated LD (CD coming tomorrow as closing is next Wed). the payment on there and the amount collected per month for 8 months is now CLEARLY on unimproved property.  My cash to close has reduced by about $3K, and my estimated payment by about $400.

So I know what is going to happen.  Next year when they get that tax bill on improved property I am going to be short in escrow account BIG TIME.  Question Im curious about is if I am able to give them what the shortage is at that time, and only have my payment adjusted by the new monthly amount?

I dont want them to roll the shortage AND the new monthly amt into my payment!!!!!!!!!

[Anonymous]

Talk to your realtor about this, as well as your mortgage company. You usually only owe on improved value starting the year your house was constructed 100% as of January 1, or whenever your appraisal district appraises.

Here in Texas, if my house was contructed in March, and my value was just dirt, they don't go back and add taxes for that year. I basically get 9 months of low taxes as a benefit of having a new build. Next year, the improved value kicks in. 

I actually closed in September and only had to pay taxes on dirt through January of this year. I am saving to pay my escrow shortage in full, and then my payment will go up what I will pay in taxes going forward.

[Anonymous]

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@Anonymous wrote:

Talk to your realtor about this, as well as your mortgage company. You usually only owe on improved value starting the year your house was constructed 100% as of January 1, or whenever your appraisal district appraises.

Here in Texas, if my house was contructed in March, and my value was just dirt, they don't go back and add taxes for that year. I basically get 9 months of low taxes as a benefit of having a new build. Next year, the improved value kicks in. 

I actually closed in September and only had to pay taxes on dirt through January of this year. I am saving to pay my escrow shortage in full, and then my payment will go up what I will pay in taxes going forward.

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In Texas as well.  Yes I already emailed my contact at the mtg company.  She stated it would all be explained when she sends the CD tomorrow and then at closing. 

So I get basically few months of cheap taxes then?  Cool. 

The money I am not having to bring in at closing due to this along with the difference in payment will be socked away in a separate account so that its there when its needed.  Thanks!!!!!

[Anonymous]

Since you are in Texas I can speak with more experience, so I will expand a bit.

There are 2 pieces to this.

1. You will start being taxed on improved value next year. Your actual tax bill for the improved value won't come out until October 2018, as tax rates for the current year aren't adopted until around that time. Your escrow shortage will occur some time between October 2018 and January 2019, depending on how quickly your mortgage company pays out.

2. Your escrow shortage isn't an item that will be fixed immediately. Your mortgage company won't require you to fix the shortage until the mortgage company recalculates your escrow, which is usually 6 months to a year after closing.

Here's my timeline, you can get dates from your mortgage company to calculate your own - 

- September 2016 - Closed 

- January 2017 - Taxed at dirt rate, paid by mortage company

- March 2017 - Escrow recalculated, got a refund as escrow reserve was too high

- January 1, 2017 - Appraisal of homes occurred, this is when improved value kicks in yearly

- May 2017 - Appraisal reports go out

- July 2017 - Values become final

- October 2017 - Tax rates get adopted

- October 2017 - Bills go out

- October 2017 - January 2018 - Escrow shortage

- January 31, 2018 - Tax bills due

- March 2018 - Escrow recalculated, shortage is called out

- March/April 2018 - Payment made to level escrow, new mortgage payment kicks in

I will have to have saved 17 months of taxes at that time - Tax payments for 2017 until the time of escrow settlement in March, plus 2 months cushion as required. At least that way, we aren't paying double taxes going forward.

[Anonymous]

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@Anonymous wrote:

Since you are in Texas I can speak with more experience, so I will expand a bit.

There are 2 pieces to this.

1. You will start being taxed on improved value next year. Your actual tax bill for the improved value won't come out until October 2018, as tax rates for the current year aren't adopted until around that time. Your escrow shortage will occur some time between October 2018 and January 2019, depending on how quickly your mortgage company pays out.

2. Your escrow shortage isn't an item that will be fixed immediately. Your mortgage company won't require you to fix the shortage until the mortgage company recalculates your escrow, which is usually 6 months to a year after closing.

Here's my timeline, you can get dates from your mortgage company to calculate your own - 

- September 2016 - Closed 

- January 2017 - Taxed at dirt rate, paid by mortage company

- March 2017 - Escrow recalculated, got a refund as escrow reserve was too high

- January 1, 2017 - Appraisal of homes occurred, this is when improved value kicks in yearly

- May 2017 - Appraisal reports go out

- July 2017 - Values become final

- October 2017 - Tax rates get adopted

- October 2017 - Bills go out

- October 2017 - January 2018 - Escrow shortage

- January 31, 2018 - Tax bills due

- March 2018 - Escrow recalculated, shortage is called out

- March/April 2018 - Payment made to level escrow, new mortgage payment kicks in

I will have to have saved 17 months of taxes at that time - Tax payments for 2017 until the time of escrow settlement in March, plus 2 months cushion as required. At least that way, we aren't paying double taxes going forward.

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@Anonymous wrote:

Since you are in Texas I can speak with more experience, so I will expand a bit.

There are 2 pieces to this.

1. You will start being taxed on improved value next year. Your actual tax bill for the improved value won't come out until October 2018, as tax rates for the current year aren't adopted until around that time. Your escrow shortage will occur some time between October 2018 and January 2019, depending on how quickly your mortgage company pays out.

2. Your escrow shortage isn't an item that will be fixed immediately. Your mortgage company won't require you to fix the shortage until the mortgage company recalculates your escrow, which is usually 6 months to a year after closing.

Here's my timeline, you can get dates from your mortgage company to calculate your own - 

- September 2016 - Closed 

- January 2017 - Taxed at dirt rate, paid by mortage company

- March 2017 - Escrow recalculated, got a refund as escrow reserve was too high

- January 1, 2017 - Appraisal of homes occurred, this is when improved value kicks in yearly

- May 2017 - Appraisal reports go out

- July 2017 - Values become final

- October 2017 - Tax rates get adopted

- October 2017 - Bills go out

- October 2017 - January 2018 - Escrow shortage

- January 31, 2018 - Tax bills due

- March 2018 - Escrow recalculated, shortage is called out

- March/April 2018 - Payment made to level escrow, new mortgage payment kicks in

I will have to have saved 17 months of taxes at that time - Tax payments for 2017 until the time of escrow settlement in March, plus 2 months cushion as required. At least that way, we aren't paying double taxes going forward.

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Holy majoley!!!  Thats a LONG time for me to be socking away money when that shortage bill comes in.  Wahooza.

Thank you SO much for this information.  I am sticky noting it to put in my new home folder!!!

[Anonymous]

No problem! Get the info on when your mortage company settles your escrow yearly, and that will give you the timing on when they will come knocking for that payment. Congrats on your new home!