The Veridian Blog

George is closing on his first purchase just before Halloween.  He is excited about owning his first home until he gets to the closing table to find out that he needs additional funds for payment of the first installment of property tax.  Since the first installment is not due until November 1, will he be able to avoid paying that?

Unfortunately, George is out of luck.  Even though in California the 1st installment of property tax is due on November 1, and the 2nd installment is due on February 1, lenders are allowed to require payment of property tax 30 days (sometimes longer!) in advance of the due date.  The reason is because taxes become a lien on real property on January 1st of every year and thus will appear on the preliminary title report as "unpaid" in the vast majority of cases.  The early payment comes as an unwelcome surprise to many borrowers, especially if they normally elect to make their tax payments on the due dates of December 10th (for the 1st installment) and April 10th (for the 2nd installment). 

The best thing for George's lender/broker is to address and disclose this upfront to avoid any uncomfortable conversations further in the process.