The way property taxes work in California: you buy a house, then at some point in the near future the county will re-assess the house at the purchase price. But supplemental tax bills come into effect because the county doesn’t reassess it right away.
For example, you buy a house for $800,000 today. Previously, it was assessed for $400,000. So, there is a difference of $400,000 that needs to be accounted for. It might take the county 6 months to complete the reassessment. In the meantime, your taxes are basically half of what you should be paying. Until the county catches up, the taxes are set at the previous assessment.
When the updated reassessment happens, there is a gap that needs to be covered between the time that you close and the time that the reassessment is done. So, a supplemental tax bill will come through for that difference.
I’ve heard of these taking up to 1.5 years, especially when COVID delayed the process.
Your Monthly Payment Likely Includes Taxes
Another thing that is important to know: most lenders will calculate taxes into your monthly payment (with your mortgage). We know what the taxes are going to be, and we factor that into your payment. So, every month you are already paying the right amount into your impound account.
But what can happen: before the reassessment happens, there are times when the account is audited and you get refunded money from this account. They might even drop your monthly tax payment because the mortgage servicer thinks they are collecting too much for property taxes.
So, I always tell my clients: we are closing this loan for you. If you get a check in the mail, then please call me right away. Go ahead and deposit the check, but know that you aren’t getting free money. It is most likely money that needs to be set aside because you are going to need it to pay your supplemental tax bill in the future.
Make sure you are ready, because the tax bill will come through at some point. It doesn’t have to be a surprise if you already have the money ready to go.
Questions? Contact Me!
If you ever have questions about what is going on, then the best thing you can do is to call your lender or real estate agent. I’m always here to help. Reach out any time for more information about your mortgage!