An Explanation of Property Tax Prorations in Escrow

This from C V Escrow:

One of an escrow officer's simpler jobs is calculating the amount of property tax that is payable by the buyer and the seller on any given transaction. One of the tougher jobs can be explaining to the buyer why they may get an official property tax adjustment months after the sale is done .

PROPERTY TAX DEFINED

Every property gets assessed by the county assessment office every year, establishing the amount of tax due on that property. At the time of a sale, it's a simple matter for the escrow agent to find out the property's tax for the full year, and apportion the correct amount to the seller for the year to that date, and the right amount to the buyer for the remainder of the year. For example, the property tax of the year is $1200.00, and the transaction closes on May l. The seller pays $400 for the first 4 months and the buyer pays $800 for the last 8 months.

SALE TRIGGERS ASSESSMENT

The complication arises because a property sale triggers a new assessment. Thus assessment happens according to the schedule and timetable of the assessment office; this means it could happen months after the transaction has closed, when the buyer has long since thought the sale over and done with.
When this happens, the property has a new assessed value-and a new tax burden-retroactive to the date of sale. It might be more or less than what the buyer paid on the closing statement, but chances are good that it will be different. Therefore the assessment office will issue an adjustment notice. If it 's a tax increase, the buyer needs to pay more. If it is a decrease, each county handles the situation differently. Check your county's procedures.
That is why , in an appreciating market, a buyer can get an additional tax bill, months after the sale, when they thought it had already been covered. And that is why, in a depreciating market, the potentially reduced taxes on the home cannot be determined and applied at escrow.