If you have a closing between now and the end of December, remember there may be an extra twist at closing that listing agents need to make sure their sellers understand.
For most of the year, pro-rated taxes due are paid out of the proceeds from the sale as defined by the payoff amount provided by the holder of the mortgage. Once taxes and everything else is taken in to consideration, Line 603 on the HUD, “Cash To Seller,” is the amount the seller will receive a the closing table.
This time of the year, things are a little different.
In most cases where a homeowner has a mortgage, the lender will escrow their taxes through the year in order to make sure the yearly taxes are paid correctly in November. This time of the year, there is a gap between when a lender will roll up the escrowed funds to pay the taxes, send it to the correct county, and the county records reflect that the payment is complete.
Here is where the “twist” takes place. Usually by early November, the homeowner should receive notification by the holder of their mortgage that all the escrowed money has been rolled up and the taxes paid, but over at the county tax collector’s office, they do not show it has been paid yet.
There are a variety of reasons for this delay, but at the closing table we have to go by what the county tax records say, regardless of what documentation the seller’s mortgage holder provides.
Here is how it works, just using round numbers.
Mr. Seller has a document from Fred & Ethyl S&L saying that their $200 a month in escrowed taxes have all been rolled up, and $2,400 for taxes was sent along to Cowford County.
They did their closing on November 1st and the HUD had $100,000 in cash going back to seller. At the closing table though, their check was for only $97,600.
Hopefully, this isn’t an issue at the closing table because our Closer has worked close with the seller’s agent to make sure they understand why there is a difference. Here is the Executive Summary: the seller will get the full amount, we just have to hold the $2,400 in escrow until the county reflects “paid” – then by check or wire, we will send the money to the seller. This should be the process, unless there was an error at the Fred & Ethyl S&L or Cowford County records, by mid-December.
You can download the PDF here.
My Agent Greg 