Escrow Thursday: How Are Property Taxes Handled in Escrow?

How Are Property Taxes Handled in Escrow?

In Washington State most counties collect property taxes twice a year, April 30th and October 31. The April payment covers January through June and the October payment covers July through December. Lenders typically send these payments via tape to the taxing authority at the end of April and October.

What does this mean to you the buyer or seller? Transactions closing during the time frame between payments run into a situation where the Seller has, in effect, paid their taxes via their monthly mortgage payments, yet the funds have not yet been posted to the account. This can create the need for escrow to collect taxes for the appropriate time period at closing, in effect causing the Seller to be billed twice for the same period. The Final Settlement Statement will show credit and debits to the Seller and Buyers accounts. Usually the Seller is credited for the amount of time they were owning the home and the buyer is debited for the amount from closing to the tax due date.

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