Home Buying in 46406>Question Details

Blair, Both Buyer and Seller in Chicago, IL

Is it possible to lower tax escrow payments? I am purchasing a bank REO and the taxes are assessed at a higher rate than what I would be paying...

Asked by Blair, Chicago, IL Mon Jan 25, 2010

If the property tax rate instantly decreases by 1% because the property will now be my residence, can I ask for lower tax escrow payments at or before closing, rather than pay the prior years assessement rate, which is 1% higher than what I would be paying as homeowner? I'm worried I'll have to pay the higher rate even though the county clearly states that the tax cap is higher for non-home properties. Will I have to wait it out or can an escrow analysis be done using the homeowner tax percentage rather than the higher percentage capped for non-home owned properties?

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Chuck Dellorto’s answer
The answer would be no. The bank usually will be responible for taxes up to the day of closing. Your lender can only base your tax rate on the most recent tax bill. So after you close you would have to file for your 2 exemptions which would be the Homestead & Mortgage Exemptions.

Hope this helps.

Chuck Dellorto
Licensed in Indiana & Illinois
0 votes Thank Flag Link Tue Jan 26, 2010
There is a lender I know who will escrow off of an estimated tax amount, as if the exemptions are in place. However, now that we are at the tail end of the year, you will most likely not be able to close in time to put the exemptions in place for 2012.
0 votes Thank Flag Link Mon Dec 10, 2012

Since it looks like you are asking about Indiana taxes, the answer in a very plain way would be no. You have to wait it out for a year sometimes two. You will file your tax exemptions with in six weeks after moving in and then they will take into effect on your 2010 tax bill and once the lender redoes your escrow. One point I have to make is any overage in 2011 you pay will be returned to you at the end of the year. Hope this helps.
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0 votes Thank Flag Link Mon Jan 25, 2010
Speak to your lender about this. Depending on the loan program and the bank's own guidelines this may be possible.

Your lender will have to underwrite the mortgage based on the most recent yearly tax bill(s), however if you know the taxes are going to be less you can request them to escrow less $$ at closing and monthly. You will probably have to sign an affidavit at closing stating that you are responsible for any shortfalls in escrow should the taxes come out higher than expected.

You may also want ask your Realtor to find out if there is a cutoff date for filing to obtain the lower tax rate for the year. In some areas you have to be the owner of record on Jan 1st to qualify. Some areas have no cutoff too. You'll definitely want to find this out.

Hope this helps!
0 votes Thank Flag Link Mon Jan 25, 2010
Basicly the same rule applies no matter where you are going. The banks will want to hold $X and base it off the previous taxes not future taxes. With tax escrows, usually in the fall the banks will review the escrow account. They are only allowed to hold a certain amount in the escrow. If the taxes go down, they will adjust your escrow payment. What usually happens though is the taxes go up and the escrow account will have a shortage for the futue taxes. You either pay the shortage or the monthly amount that goes towards taxes will go up. All cities/towns are in the same position. It's unlikely that taxes will go down and more likely that taxes on lesser assessed homes will go up.
0 votes Thank Flag Link Mon Jan 25, 2010
Patrick, I appreciate your help, but I'm buying my home in Indiana (moving from Chicago to Gary, IN - Lake County). There is supposed to be a new tax cap phased in for 2010 at 1% for homeowners and 2% for non home residential properties. Thats why I was asking, I will not be paying taxes in Cook county.
0 votes Thank Flag Link Mon Jan 25, 2010
The taxes for your escrow will be based on past taxes not future taxes. Banks usually want 6 months worth of taxes in escrow and will base that amount on the intent of taxes going up, which they usually do.

Don't count on property taxes going down especially in Cook County. Assessed values may be going down, but the multiplier used will be going up. Chicago has a budget that they need to maintain. Lowering taxes isn't something that is going to happen across the board.

Once you own the property, you may be able to protest your taxes and get the tax reduced but again the multiplier is going to go up to bring taxes back where they were.
0 votes Thank Flag Link Mon Jan 25, 2010
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