Once again, it's that time of the year when we wait to see how much our property tax will increase for the new tax year which begins July 1. While the tax payment for the first half of the year beginning July1 through December 31, is due on July 1, these tax payments are not late unless they are received after August 1. Payment for the second half of the tax year, due on January 1, is only late if received by the Tax Collector after February 1. For towns where tax payments are assessed once a year and due on July1, they are late if received after August 1.
For the majority of homeowners, their tax payment is escrowed in the mortgage payment. Regardless of the increase on July 1, the lender will advance the payment to the Tax Collector before the August 1 late date and bill the homeowner for the additional amount it paid to cover the tax increase. This additional escrow will increase the monthly mortgage amount after receipt of notification from the lender. For those homeowners whose taxes are not being escrowed with the mortgage payment, they must ascertain from the Tax Collector what the increase tax payment will be. Even if the Tax Collector fails to send you written notification of the taxes due, it is the homeowner's responsible to pay the taxes on or before its due date, sometime between July 1 and August 1. If the taxes are not paid by August 1, a late charge is assessed monthly, and a tax lien may be placed on your property if the taxes continue to be unpaid. Most Tax Collectors will have this information readily available at its office.
Another common mistake often made by sellers and buyers is the overpayment of taxes at closing. In several instances the Buyer's closing attorney may collect from the buyer at closing and pay the taxes which will become due within 30 days after the closing. The Seller's mortgage lender may also pay the taxes, which have been escrowed and held in a separate account for six months or twelve months prior to the closing, if the closing occurs relatively close to the tax payment period. The tax collector may in effect receive two separate tax payments for the same property. If this occurs the Tax Collector is under no obligation to notify the owner of the property (whether the old or the new), that it has received a double payment of taxes for your property. By statute, the Tax Collector will hold on to the overpayment for up to three years. After three years the moneys will be forfeited without notice, and is not subject to recovery after three years.
Here's the Tip:
If you are selling property sometime between June and August, make sure that your closing attorney verifies with the lender that your payoff of mortgage includes information on your escrow balance. Check to make sure the lender has not paid the taxes before the due date. If they have, confirm with your attorney that you will receive a credit from the buyer for the taxes paid. If you are a buyer, closing between June and August, ask your attorney to verify the amount of the tax increase for the coming year, and make sure you receive a copy of the tax bill if the seller represents that the taxes have been paid or will be paid at closing and by whom. After your loan has closed, and shortly after you have moved into your new home, make a visit to the Tax Collector, introduce yourself as the new homeowner, and ask how much your taxes are and whether they have been paid.
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