Unpaid Property Taxes That Should Have Been Paid Through Escrow
my prorated property taxes came were paid at closing but now I'm getting a delinquent tax bill
You mean they were supposed to be paid at closing.
There are two major possibilities:
1) They were not, in fact, paid
2) They were paid, but were miscredited, or they were properly credited, but your county goofed anyway.
In the first case, the county did not get the money they were supposed to, which means you still owe it. There are any number of explanations for why this happened. Some of them are innocent, some are criminal. But you owe the county money that they don't have, in which case you need to pay it, and precisely what happened to the money that was supposed to pay those taxes originally is not the county's problem - it's between you and your escrow provider.
Investigate this promptly. Look at your HUD 1 form. Lines 106 and 107 are for buyers reimbursing sellers for taxes. Lines 210 and 211 are for tax liabilities incurred but not yet paid. Line 1004 is taxes and assessment reserves, and I've also seen extra lines in section 900 used. If it is listed as paid, contact your escrow company to determine if it was paid in truth. Sometimes the escrow company messes up. If the escrow company tells you that taxes were paid, double check with the county. Sometimes the payment was misapplied to the wrong parcel, sometimes it was correctly credited, but due to the fact that government bureaucrats get paid the same whether the job is correctly done or not, they just aren't correct or up to date. Sometimes time will repair the problem, but it's not something to count on. Get a statement from the escrow officer that it was paid, receipt number X or in conjunction with escrow number so and so, thus and such date, in the amount of $X. In some cases, you may have to get a copy of the canceled check or wire transfer to prove that it was paid to the county's satisfaction.
Do not allow this problem to sit. It will only get worse, and you could find yourself facing tax liens, tax foreclosure, or a situation where the lender then pays the taxes to protect their interest, and follows up by presenting a bill to you. They'll charge you interest for any amount they pay in defense of your interests and theirs, plus a fee for the trouble they were put to. I've never had it happen to me or a client, so I don't know how high the interest is, but it's not cheap.
Property tax liens take first priority over basically everything. It takes a while - potentially years in California - before they can condemn the property for unpaid property taxes, but once they do start the process, all of the protections you have against lender foreclosure are much weaker against property tax foreclosures. Lenders are therefore understandably nervous about delinquent property taxes, and they typically want to take action pretty quickly. Don't let it get to that stage. If you have to, you're better off paying them a second time and applying for a refund than letting it get to the point where the lender feels obliged to step in to protect their interests.
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I closed escrow on my home October 2009. This year, my property taxes doubled due to previous unpaid liens on the property. I have spoken with the tax collector and title. Title is telling me that I cannot get refunded until 2011 when my property gets reassessed (Oct 2010). I do not understand how I could have paid someone else's old liens (seller), yet I have to wait to get reimbursed. Is this true? I called the tax collector again and was told that I should be reimbursed immediately by title.
Help! Thank you
I am not a lawyer, so you really need to consult one. That said, the tax collector may be trying to mollify you and has no authority over the title company, but my understanding is in line with what they told you. The people to make an authoritative determination are at your state's Department of Insurance, which has regulatory authority over title insurance
The HUD that we received has nothing in the line 106,210,211. But when we checked the county website, it has a delinquent tax for the amount of $30,000. Our Lender and the Escrow company said that the Title company will not release the title if there's any unpaid taxes. In other words, the only evidence that we will get for the clearance of the unpaid tax is from the Title company. Will this be sufficient? Can we sign the loan although the tax has not been paid? Please advice.
I doubt escrow said that, although they may have said something you interpreted that way
Talk to a lawyer because every state is different and you don't say what state you're in, plus I'm not a lawyer and know the difference. Even here in California, there are curlicues in the law that can change the standard answer.
That said, I'll share my understanding of the issues as they sit in California. The thing I'd be concerned about is the title commitment. There's going to be an exception on schedule B for those unpaid taxes, which will in turn cause the loan funder to NOT release funds without an assurance from escrow that those taxes will be paid in full out of the funds the seller would have received.
If the taxes will not be paid in full, the loan would have to go back to underwriting and be re-written as essentially a second trust deed with a higher loan to value ratio. Not going to get approved with anything like the pricing you were quoted, if it can be approved at all - which it most likely won't.
If the seller proceeds can't cover all necessary items that need to be paid, they need to bring in cash or get a short sale approved by their lender. The latter is a major pain and may cause your escrow to go back to square one because now you have a purchase contract that needs a third party to sign off on it. Yeah you may be able to sue for nonperformance if the seller can't deliver, but the chances of actually getting any money are nonexistent.
So in preparation for that talk with the lawyer, find out if seller proceeds will cover the unpaid taxes in addition to everything else that must be paid. I probably wouldn't sign off on the loan paperwork before I knew that information.