Real Estate 101 - Property Taxes

Definition
	What are property taxes?

Assessment
	What is an Assessment?
	Who is an Assessor?
	What is Assessed Value?
	What can I do if the assessed value is higher than the market value?

Impound Account
	What is an Impound account?
	What are the typical contents of an impound account?
	Do all loans require that an impound account be set?

What are property taxes?
Property taxes are the taxes that are levied based on assessed value of the real property. The property owner is responsible for paying the property taxes two times a year. One can find out the rate of property taxes by calling the local tax assessor's office.
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What is an Assessment?
Assessment is a tax charged by a county to pay for improvements or repairs in a neighborhood. For example, a county might charge an assessment tax to homeowners living in a particular neighborhood to pay for major repairs to the sidewalks.
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Who is an Assessor?
An assessor is a public official who evaluates real estate properties for establishing property values and thus property taxes.
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What is Assessed Value?
Assessed value is the value estimate, set be the government, based on which the property taxes are calculated for a property.
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What can I do if the assessed value is higher than the market value?
Very rarely, the assessed value represents the real market value of the property. If you have evidence that the assessed value is higher than the market value of your property, causing your property taxes to be higher than what they should be, you can file a petition at your tax assessor's office for adjusting the assessed value. Make sure you include all the evidence that makes your case strong.
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What is an Impound account?
An impound account is an account set up by a lender for payment of property taxes, hazard insurance and other recurring expenses such as mortgage insurance and flood insurance. An impound account is also known as an escrow account (different from escrow).
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What are the typical contents of an impound account?
Typically, an impound account has following prepaid recurring costs: Hazard insurance premium for 2 months, mortgage insurance premium for 2 months (if applicable), flood insurance premium for 2 months (if applicable) and property taxes for 6 months.
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Do all loans require that an impound account be set?
Not necessarily! Usually loans with low loan-to-value ratio (higher down payment) do not have an impound account requirement. Also, in some cases the requirement of having an impound account is waived in return for additional closing costs charged up-front.
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