Any recourse if property taxes are under estimated?

Asked by bc, 32218 Sun Jan 27, 2013

A builder's "preferred lender" estimated property taxes based on the vacant lot and the payment estimate was at buyer's maximum. Actual taxes are $2000/year higher and now buyer cannot afford their home. Any recourse against mortgage broker or lender?

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Patti ODwyer, Agent, Jacksonville, FL
Wed Nov 27, 2013
Every closing I've attended with this situation, the closing agent explains to buyers that the current year taxes will not cover the 2nd year escrow needed. It is the buyer responsibility to advise the lender on 2nd year taxes. That first year is a great advantage, but ultimately it is the buyer responsibility to make sure the correct funds are escrowed. Maybe the lender will let them spread it out over longer period of time. Worst case is bite the bullet for this coming year - it will go back down in 2015 when actual tax escrows are calculated.

Also as a realtor, I always explain this circumstance to buyer, and tell them to have their escrow amount raised at beginning of 2nd year to make sure they can cover the taxes.

Our local board contract actually has a paragraph about this in the contract, advising not to rely on previous taxes estimations. Here in Florida, because of a tax cap, a seller can be paying about $1500 on their property, but when the transfer sale goes thru, next year taxes can double for new buyer.
0 votes
Charles Chor…, Agent, Orange Park, FL
Mon Jan 28, 2013

I got bit many years ago when I bought my home in Clay county when they adjusted my taxes that went up over $2000.

When a new construction home is sold most builders disclose that the property taxes are based on undeveloped land. The lender then "estimates" what the property taxes can be. It is strange in this case as most lenders overestimate the taxes. Read through the documents to see if there is a disclosure on property taxes. Then consult with a real estate attorney.

All the best
Charlie Chorman - REALTOR
Accredited Buyer Representative
Coldwell Banker Vanguard Realty
0 votes
Thanks! I've gone through some of their paper work, and the GFE estimates $1729 and their actual taxes are $3690. The adjustment with the new tax amount and the escrow shortage of $4040 this couple's payment has gone up almost $600 per month. I've advised them to discuss a modification with their lender. I wasn't sure if there was any ethical repercussion if a complaint was filed against the mortgage broker The thing that upsets me most is that they had a Realtor who only registered her name with the builder.
Flag Mon Jan 28, 2013
Dan Tabit, Agent, Issaquah, WA
Sun Jan 27, 2013
If you are asking if there is any "legal recourse" you need to seek an attorney's advice. Frankly I doubt it since a "pre-approval" is always subject to so many issues that they are PRE approvals and not final approvals.
If the lender made any commitments in writing, get those to an attorney, but I doubt they did. It's just not the way lending works. Sorry, I suspect this is not the answer you were hoping to get.
0 votes
Danielle Sha…, Agent, Cape Coral, FL
Sun Jan 27, 2013
Any lender will use the most recent tax bill for escrow purposes. On new construction is that smart? No. There is probably a document or two in your loan papers that discusses taxes; might be worth looking through them to see if anything exists.
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