Escrowing taxes

[reinvestor]

What is the name of your state?What is the name of your state? Michigan

I purchased an investment house and the closing was today. Two hours before closing, the title company informs me that in addition to my closing costs, they must also collect the full amount of the summer taxes at closing, which will be held in escrow until the tax is due. The reason they gave for doing this was that the first payment on my new mortgage happens to fall on the same day summer taxes are due (July 1).

The title company collected 1.5 times the amount of the previous year's tax amount from me at closing, even though I DO NOT HAVE A TAX ESCROW with the mortgage. They say that I will be refunded any overage when the they pay the summer tax bill.

My question is: If I am not escrowing any items with my mortgage payment, can the title company collect from me, and hold in escrow a tax payment even before it has been billed? This was a substantial payment which I didn't expect. Can they legally do this?

 

[seniorjudge]

What is the name of your state?What is the name of your state? Michigan

I purchased an investment house and the closing was today. Two hours before closing, the title company informs me that in addition to my closing costs, they must also collect the full amount of the summer taxes at closing, which will be held in escrow until the tax is due. The reason they gave for doing this was that the first payment on my new mortgage happens to fall on the same day summer taxes are due (July 1).

The title company collected 1.5 times the amount of the previous year's tax amount from me at closing, even though I DO NOT HAVE A TAX ESCROW with the mortgage. They say that I will be refunded any overage when the they pay the summer tax bill.

My question is: If I am not escrowing any items with my mortgage payment, can the title company collect from me, and hold in escrow a tax payment even before it has been billed? This was a substantial payment which I didn't expect. Can they legally do this?

Q: My question is: If I am not escrowing any items with my mortgage payment, can the title company collect from me, and hold in escrow a tax payment even before it has been billed?

A: Yes.


Q: Can they legally do this?

A: Yes.

 

[reinvestor]

Q: My question is: If I am not escrowing any items with my mortgage payment, can the title company collect from me, and hold in escrow a tax payment even before it has been billed?

A: Yes.


Q: Can they legally do this?

A: Yes.

Can you elaborate? Is this customary, for a title company to escrow taxes where the buyer does not have an escrow account with the lender? I would rather pay the tax when it is due.

 

[seniorjudge]

Can you elaborate? Is this customary, for a title company to escrow taxes where the buyer does not have an escrow account with the lender? I would rather pay the tax when it is due.

The lender probably asked the title company to escrow the taxes.

 

[efflandt]

What is the tax year of property taxes due this year. If they are 2004 taxes due in 2005, I would think that you should have gotten credit from previous owner for full tax payment this year (since they owned it in 2004) and almost half of estimated tax due next year (to cover 2005 tax until closing date). At least that is the way it is done in IL and WI.

If Michigan likewise has similar payment for previous year tax, and you did not get credit somewhere in your closing papers for all 2004 tax due this year and some 2005 due next year, you are getting ripped.

Of course when I bought 12.5 acres of woods in Wisconsin years ago, I did not even pay attention to that because property taxes were never enough to worry about ($18.98 for 2004 tax due in 2005).