Property Taxes, Escrow Accounts, What a Mess!
We have had so many issues arise in that last couple of years regarding property taxes in Indiana, and these issues affect all homeowners. Whether you are buying a new home or have been in the same home for years, property taxes affect us all.
Unfortunately, the property tax nightmare just got even worse. Last week the Marion County Treasurer announced they are sending out provisional tax bills again this year. This means they will send an estimated property tax bill now followed by a reconciliation bill at a later date.
With the uncertainty regarding tax bills, few homeowners have been unaffected by the lack of clear timeframes and payment schedules. This is especially true if you pay your taxes through an escrow account. Chances are that you are like my many clients who have received refund checks or letters requesting additional funds from their mortgage companies.
As a real estate professional, the best advice I can give is that if you get a check from your mortgage company either put it in a savings account or send it back to them marked for it to be placed back in your escrow account. But above all: DON’T SPEND IT!!!
Mortgage companies handle property tax systems across the country, which vary from state to state. They had been set up to handle Indiana’s method of two installment payments with the taxes being collected a year in arrears. But as tax bills have become delayed, the escrow accounts have accumulated an excess of funds.
Lenders are only allowed to hold a certain amount of money in escrow for future payments, so when the funds pile up they are required to send the excess money back to the borrower as a refund. Unfortunately when the tax bill does eventually arrive, the account is short the necessary funds to pay the bill. The lender will pay the bill and send a letter to the customer saying the escrow account is now short money and that you can either pay one flat amount to make up the difference or increase your monthly payment to cover the difference and prepare for the next installment.
In order to keep your escrow account properly funded for the payment of future tax bills, it is imperative that you return any refund you receive or set it aside to be returned upon request. I wish there was an easy solution to this tax mess, but unfortunately it seems to be an ongoing struggle. My advice is to protect yourself from unexpected expenses by checking with your lender to insure that your escrow account is properly funded. This simple phone call will be worth the time if it avoids unnecessary worry down the road.
