Closing costs and taxes: Oct or Nov?

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PadreBrian_IHB

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I have my eye on a couple down and out REO's, here's an Orange County Tax question...



As far as keeping closing costs down...is it better to close in Oct or November. There won't be an impound account, I'm going to pay my own taxes.



Isn't there some weird tax deadline between Oct 31st and Nov 1?



tyia!
 
I'm not sure if this will answer the question but it's the closest thing I could find:

"Changes in ownership that occur between Jan. 1 and May 31 are subject to two supplemental assessments because of the State's property tax calendar." --

<a href="http://www.ocgov.com/assessor/buySell.asp">Orange County Assessor Department: Buying Or Selling Real Estate?</a>

Here's another link with <a href="http://www.ocgov.com/assessor/dates.asp">important tax dates</a> to remember.

Hope this helps. I will be curious to see what other comments say.
 
[quote author="Ambiepants / SoCal78" date=1220876427]I'm not sure if this will answer the question but it's the closest thing I could find:

"Changes in ownership that occur between Jan. 1 and May 31 are subject to two supplemental assessments because of the State's property tax calendar." --

<a href="http://www.ocgov.com/assessor/buySell.asp">Orange County Assessor Department: Buying Or Selling Real Estate?</a>

Here's another link with <a href="http://www.ocgov.com/assessor/dates.asp">important tax dates</a> to remember.

Hope this helps. I will be curious to see what other comments say.</blockquote>


The "supplemental" assessments sound bad, but they are merely catchup tools to ensure that you are paying the right amount of tax on the (probably) stepped-up value of your purchase.



Property Tax calendar begins June 1 through May 31st of each subsequent year.



OP - You pay tax <strong>beginning the day that your ownership is recorded </strong>with the county. If you record at a later date, your tax liability will be lower. There is no "weird deadline" regarding the dates that you mentioned.



Hope this helps.

-IR2
 
You will have to pay the prorata share of the property tax that was already paid by current owner (in this case, most likely the foreclosing lienholder).



For illustration purpose, assume the current tax amount is $4800 year; if you close on Nov 1, you will be required to prepay for two month taxes, i.e. $800 in your closing costs. However, your new tax will be based on new puchase price, let's say $300K, using 1.2% tax rate; yor actual tax liability is only $300 per month; so you are overpaying County Assessor $200, which you might get back in your next "supplemental tax bill." On the flip side, if you are buying a higher price home than the current assessed value, you will pay the County Assessor the difference on your next bill.



So, if your major concern is to lower "initial closing costs", then delay the closing date. But always remember, it costs you money on rent and reduce your tax deductions (interest costs and property tax) for the year. Combine that with locking the optimal mortgage rate (you only have 30 to 60 days window in a purchase transaction to do so), you will have a complicated calulation. Weigh the pros and cons before you act. Hope this analysis give you a new perspective on your decision-making process.
 
[quote author="Informed_Decisions" date=1220928956]You will have to pay the prorata share of the property tax that was already paid by current owner (in this case, most likely the foreclosing lienholder).



For illustration purpose, assume the current tax amount is $4800 year; if you close on Nov 1, you will be required to prepay for two month taxes, i.e. $800 in your closing costs. However, your new tax will be based on new puchase price, let's say $300K, using 1.2% tax rate; yor actual tax liability is only $300 per month; so you are overpaying County Assessor $200, which you might get back in your next "supplemental tax bill." On the flip side, if you are buying a higher price home than the current assessed value, you will pay the County Assessor the difference on your next bill.



So, if your major concern is to lower "initial closing costs", then delay the closing date. But always remember, it costs you money on rent and reduce your tax deductions (interest costs and property tax) for the year. Combine that with locking the optimal mortgage rate (you only have 30 to 60 days window in a purchase transaction to do so), you will have a complicated calulation. Weigh the pros and cons before you act. Hope this analysis give you a new perspective on your decision-making process.</blockquote>
Any HOAs dues will also have to be prorated. Make sure to close towards the end of the month so that your prepaid interest on the loan will be lower. Another than that, the timing of closing on any particular time of the month or year doesn't really matter because of proration.
 
Just make sure to save the max property tax every month until the supplemental tax bill comes due. Take your value times the total tax rate and divide by 12. It is a one time fee that catches you with the assessor on the new value you purchase at. You actually may get billed at a lower tax rate by the assessor until the supplemental bill comes Due and sometimes it take 6 months to a year before they figure out the property has changed hands and send out that supplemental. The supplemental is the lower value vs the new value every month till the assessor catches up and then your even for the rest of home ownership and will never see that bill again.
 
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