Real Property Taxes

Real property taxes are paid to the county in which the property is located.  Real property taxes can either be paid by you directly to the county or if your mortgage payment includes an escrow account (also called an “impound account”) they may be included as part of your monthly mortgage payment and paid when due by your home lender.

In California, real property taxes are due each year on November 1, but they are usually paid in two equal installments, which can be paid without incurring a penalty by December 10 of that year and April 10 of the following year.  The standard real property tax bill has two tear-off coupons, one for each installment, which state the exact amount to be paid and its due date.

If your monthly mortgage payment includes an escrow account that pays your real property taxes, then each month your lender will charge one-twelfth of your annual property taxes as part of your house payment instead of you having to budget for the two installments.

For properties located in Santa Clara County, you can look up your real property tax history at:

http://payments.scctax.org/payment/jsp/currentSecured.jsp

Delinquent Real Property Taxes

If you are behind on real property taxes, a Chapter 13 plan can provide a means of catching up on your arrears, along with other secured debts.  Many of our clients file Chapter 13 plans which include repayingreal property taxes.

If you do not have an escrow account with your home lender to pay your property taxes, your lender may set one up after it pays delinquent taxes.  Your lender would set up an escrow account to pay future property taxes.  Then your lender will increase your monthly mortgage payment to catch up on the amount they paid for your missed taxes, plus they will increase it again to collect enough money from you to pay the next year’s taxes when they come due.

In California delinquent real property taxes can result in a tax sale of the property, but the process takes about five years before this actually happens.  Most mortgage lenders have mortgages on property in several states, and in some states past-due taxes can result in a much faster tax sale of the property.  As a result, most home lenders pay property taxes fairly soon after they become delinquent and then increase borrowers’ payments to recover what they paid.

If you are behind on your house payments and if you have an escrow account set up with your lender to pay your property taxes, your lender may use the payments you have paid to pay itself and then pay the property taxes from its own funds.  Then it will increase your monthly payment to recover the taxes they paid.

 

Calculating Real Property Taxes

Calculation of real property taxes is not a simple matter.  The starting point for the calculation is the county assessor’s estimate of the real property’s value, and the taxes are simply a percentage of that assessed value.  But over thirty years ago a California law called Proposition 13 created a situation where two identical houses with the same values can now have vastly different property taxes.

Proposition 13 was an initiative placed on the ballot in 1978, at a time when home values were starting to rise and many homeowners with fixed incomes were faced with homes that were increasing in value and their property taxes were increasing along with their home’s value.  Proposition 13 was intended to deal with the type of situation where homeowners had lived in their home for years, paid off their mortgage, and retired on a limited income, only to find that their home value had increased and they could no longer afford to pay their property taxes on it because the taxes increased along with the value increase.

Proposition 13 rolled back the assessed value to 1975 values, and froze the assessed value of all real estate in California.  It didn’t change the real value of the property at all, it just kept the tax assessor from using the property’s real value to increase the assessed value of the property.  It included a provision to allow a two-percent per year increase in the assessed value, and it allowed the tax assessor to reassess the property if its ownership changed or if there was new construction.  But once the property was sold, although the property would be reassessed at that time, its assessed value was again frozen and could only increase from that value by two percent each year.

The effect of Proposition 13 has been to create vast differences in property tax amounts between similarly valued homes.  If you bought your home twenty years ago for $100,000, let’s guess that with the recent decline in home values, it is worth only about $350,000 now, but on the tax assessor’s books if it was assessed for what you paid, it’s assessed value is only about $178,000 now.  If your new next-door neighbor just bought an identical home for $350,000, his assessed value will be $350,000 and he will pay about twice the property taxes each year that you pay.

Many homeowners are requesting a reassessment of their property due to the recent decline in home values.  The recent decline in real estate values has prompted many people who bought homes recently or who live in particularly distressed areas to request reassessment of their property values by the tax assessor.  If you believe that a reassessment of your home would lower your assessed value, you can contact the tax assessor in your county.  In Santa Clara County you can go to the Tax Assessor’s website and see what value the county is currently using for your real property.  If you think that the county is over-valuing your property, you can apply for a “changed assessment”.  Information about this process, including an online application form, can be found at:

https://www.sccassessor.org/index.php/online-services/decline-in-value/prop-8-information#prop8-process

For properties located in Santa Clara County, you can look up the county assessor’s report on your property at:

https://www.sccassessor.org/index.php/online-services/property-search/real-property