Client Question: “Why When Buying New Construction Condos are my Property Taxes Estimated?”
If you are buying a new construction condo, such as our clients who just purchased at the recently completed Gridiron condominiums, the exact amount of your annual property taxes will not yet be known and an estimated amount will be used.
This is because the county tax assessor’s office takes some time after a condo building is completed to separate the one tax parcel, for the lot the building was built on, into individual condo units with individually assigned property values and tax assessed amounts based on those values. Because of this, there will only be an estimate at the time of closing that will be used by the buyer’s lender and/or escrow company to pay those estimated property taxes upon closing. How much do they estimate you might ask? Well, it does depend on the lender, but it’s fairly common that they will use an amount equal to 1% of the purchase price as the estimated amount for the year. Then, at closing, they will pro-rate that amount to pay the taxes to the county and take an additional 3-6 month’s worth of the estimated taxes (called impounds) to fund your mortgage’s escrow account so your lender can pay the taxes on your behalf when they come due again.
So for example, if you are buying a $700,000 condo unit, the estimated annual property tax bill will be $7,000. This amount will be pro-rated to reflect the time you owned the condo during the current tax bill period and used to pay your taxes current with the county.
Once the county tax assessor’s office separates the tax parcel, they will update your property tax account to reflect the actual tax amount and then your mortgage company, who pays your property taxes on your behalf, will adjust the amount that is owed and will send the property owner a notice. If you have over paid based on the estimated tax amount, then your account will show a credit and if you have underpaid (which is likely not the case) then they would adjust the account and send a bill for the difference.
Next week, more on how the property tax amount you owe is actually determined.
By Marco Kronen with Seattle Condo Review: A guide to Seattle downtown condos.