As most homeowners are aware, property taxes for 2011 are due by January 31, 2012. Many homeowners try to pay their property taxes before year-end to reap the maximum tax benefits, but what if you are facing a different situation? What if you don’t have the money to pay your property taxes—or even your mortgage—and are considering a short sale on your home?
The good news is that any taxes due on your tax bill are paid in the short sale. That means you don’t have to worry about paying a dime in property taxes. Even if your short sale extends into the New Year, the tax bill is still paid. So, if you are considering a short sale, you won’t have to come up with any cash to pay your tax bill before beginning the process.
How is the tax bill paid? If you have an escrow account that is current, the escrow account will pay the property taxes. If there is extra money in the escrow account over and above the taxes due, the bank will keep the overage and you will forfeit the remainder of your escrow account. If you’re behind on your mortgage payments and there is not enough money in the escrow account to cover the past due amount, the property taxes will still get paid as part of the short sale process. Taxes always take priority over the principal amount due.
That covers current property taxes that need to be repaid—but what happens if you have back taxes due on the property? In that case, the bank will direct some of the proceeds of the short sale to cover those back taxes. Only when all back taxes and liens are paid does the bank then apply the remainder of the funds from the short sale to the principal balance due on the mortgage.
In short, whether you are worried about back taxes or paying your current property tax bill (or both), you’re covered. All taxes and liens on the property are paid in full by the bank from the proceeds of the short sale. Don’t let a tax bill be the only reason you decide not to complete a short sale of your property. Contact our office today and we can walk you through the process so you can get out of debt and start the New Year on solid financial footing.