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Old 02-28-2009, 06:15 PM
100 posts, read 397,305 times
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My wife and I are in the process of signing contracts on a place and we're getting vastly different closing-cost estimates for our real estate tax escrow. Can someone help me figure this out?

We're set to close on or about April 10th (but it will likely be the end of April or beginning of May).

Our lender (an honest business associate) estimated that we'd need the equivalent around 8 months worth of taxes for escrow at closing. Our real estate lawyer has estimated that we're going to need the equivalent over 12 months - more like 14 months.

There's about $6k-$7k difference in those numbers, so we're not talking a small amount.

Taxes with STAR are high in that area and around $15k.

I "get" the idea that you're paying the seller for taxes already paid, and putting money in escrow for taxes not yet paid. But I can't seem to figure out the right formula for reconciling the big difference in estimates.

Help is appreciated!
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Old 02-28-2009, 06:48 PM
Location: On the Chesapeake
43,449 posts, read 57,755,209 times
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I don't know if this will help but how escrow is figured is: property tax divided by 12 = tax per month times 14 divided by 12 = your monthly escrow.

$120/12= $10 x 14= $140/12= $11.67 (your monthly escrow amount)
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Old 02-28-2009, 08:14 PM
100 posts, read 397,305 times
Reputation: 41
Thanks. I'm moreso trying to find out the number for the initial deposit, i.e., what's due at closing and the starting escrow balance.

Closing is on or about April 10.
Town taxes are due at the end of January and are $4,470.22.
School taxes are due at the end of September and are $10,605.99.
Assuming homeowner's insurance is $1700 (we've been quoted as low as $700).

I've read alternately online that you should have "13 months" to desposit at closing. I've also read that you need "6 months + 2 months" reserves. It also says, "The federal Real Estate Settlement Act limits the amount lenders can require in escrow to a maximum of two months' payments." I'm assuming the latter refers to reserves.

Our agent / laywer / lender have gone through some of the details with us, but come up with different numbers....I've also tried online calculators, but I've gotten different numbers back.

Last edited by Scott99999; 02-28-2009 at 08:51 PM..
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Old 02-28-2009, 11:12 PM
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,756,538 times
Reputation: 958
Are your town's taxes paid by the fiscal quarter and in advance? What about the school taxes?

In Vegas you can count on any prorated taxes, plus if you are too close to the upcoming due date you can count on a quarter of taxes upfront (to be paid directly to the county), plus 2 months reserves. So for a purchase closing in April you would need Q4 prorated (fiscal Q4 starts April 1st but taxes are due March 2nd) plus 2 months, but for a closing in March you would need Q3 prorated (only a month though) plus Q4 upfront plus 2 months reserves.

Keep in mind that this is specific to Vegas and is only an example.
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