Rising equity is AWESOME! Anywhere from 15%-25% for for most Denver CO metro homeowners in the last 2 years. And it’s common for owners to think our homes would sell for more than our neighbor’s…..UNTIL TAX ASSESSMENTS come out! I’m getting blown up with tax questions….so here is the scoop on how property taxes work in Colorado and how to appeal them.
Our local government in Colorado conducts evaluations every 2 years to assign a value to your home for taxation purposes. An assessment isn’t the same as a private appraisal, and the assessed value of your home isn’t necessarily how much you could sell it for today.
Real estate assessment letters are mailed to homeowners. The letter will include some information about your property, such as lot size or a legal description, as well as the assessed value of your house and land. Additional details—number of bedrooms, for example, or date of construction—can often be found in the property listing on your local government’s website. Your property tax bill will usually be calculated by multiplying your home’s assessed value by the local tax rate, which can vary from town to town.
Home values have been increasing so it makes sense that your annual property taxes have too. When this happens, your taxes due often exceed the amount your current lender is collecting in escrow with your mortgage payment.
Once new tax assessments come out, your lender often receives a copy. They will then evaluate your escrow account and project the account balance once your taxes are paid. If they project your escrow balance will fall negative (or below the minimum required), the lender will inform you of an “escrow shortage”. This means you need to add money to your escrow account to get the balance within the acceptable range. They will present you with options to:
- Make a “one time” escrow payment
- Increase your monthly payment until the balance is restored.
2019 was the most recent valuation year so we will see many property tax bills increasing this year….and many will have escrow shortages. If you have questions about your specific situation or would like a hand making sense of your lender’s escrow analysis, feel free to give me a shout.
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This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.