Below is the information we have on our website, and it is something every buyer should understand to avoid surprises.
Supplemental property taxes often create significant confusion for new homebuyers. When someone purchases a property in California, the County Assessor is required to immediately re-assess the property for property tax purposes. This re-assessment usually correlates to the purchase price. This re-assessment process, however, can often take over six months.
At the time of purchase, lenders and escrow companies usually base property tax payments on the property tax bill of the current owner or seller. Problems arise because the seller’s property tax bill usually correlates to the price the seller paid for the property, which is often much less than the price the buyer is paying for the property. Buyers often mistakenly believe that the property tax payment estimate at the time of purchase accurately reflects their actual property tax liability. This is usually not the case.
Buyers should expect a “Supplemental Tax Bill” from the County Assessor anywhere from three to nine months after purchase, depending on the County. This supplemental bill could be a sizable amount if the seller’s property taxes were relatively low. Buyers need to know they are responsible for paying the supplemental taxes, even if they have an “Escrow or Impound Account.” Buyers should contact their loan servicer as soon as they receive a Supplemental Bill.
Supplemental Tax Bills can also cause confusion when new buyers refinance into a new loan six to twelve months after a purchase. Sometimes a borrower’s housing payment will appear to increase even if he or she is refinancing into a lower rate. This is because lenders are basing the new housing payment on the new property tax liability, while borrowers are still basing their housing payment on the seller’s property tax liability (that is too low).
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
