December 2016 Mortgage Market Share Report

December 21, 2016

As we approach the New Year I thought it would be worthwhile to revisit the pitfalls surrounding real estate tax pro-rations.

The commonly used Purchase Agreement provides that taxes will be prorated on the last certified tax amount. As a closing agent, we are bound to complete the transaction on those terms. This does not always result in a fair pro-ration between the parties and can have an adverse effect on tax escrow calculations.

The amount of the 2016 pay in 2017 taxes will not be known until mid-March when those taxes are certified. Tax pro-rations for closings that take place between January 1, 2017 and mid-March will be based upon the 2015 pay in 2016 taxes. It is possible that those taxes will not correctly reflect significant increases in the assessed valuation or the status of homestead and other exemptions.

Transactions especially prone to these circumstances include new construction, sales from an estate, sales of bank owned property and sales where the sellers have relocated and no longer live in the property. After the purchase agreement is accepted, it is difficult to address these problems.

These risks are best addressed when the parties first enter into the Purchase Agreement. Current information can be requested from the Auditor for exemptions or the Assessor for valuations so that the offer accurately reflects the situation. Compounding the problem is the fact that the Property Record Card and the County?s GIS system inconsistently reflect changes to exemptions and valuations. And, the County has no protocol for recording the date that changes are made to the records.

During November, our closing team completed seller-side closing statements two or more day prior to settlement in 86% of our transactions. And during November our title team averaged 3.75 days to produce a title commitment.

Finally, thanks to all our clients for continuing to trust us to help you with your transactions during 2016! We had a spectacular year and are looking forward to more of the same in 2017. Best wishes to all for a terrific holiday season and New Year!

~ John Bethell