We’re nearing the time of year in Oregon where “hold and pay” for property taxes come into play. Oregon’s “hold and pay” typically impacts sales from early September to mid-October. Now is the time to let your buyers know about this added expense on their upcoming home purchase.
In Oregon, our tax year runs from July 1 to June 30; However, taxes are due by November 15. When your closing date is between November and June, you’ll need to pay the seller prorated taxes for the tax amount they have paid from your closing date through June 30.
For example, if your closing date is March 1, you’ll owe the seller approximately four months of taxes (March 1 to June 30).
When your closing date is after June 30 but before September 1, the seller will owe you money from July 1 to the day before your transaction is funded and closed.
For example, if your closing date is August 1, the seller will owe you approximately one month (July 1 to July 31).
When your closing date is between September 1 and approximately October 15, property taxes are a lien against the property, but no one knows for how much. Because the property taxes will be a lien, lenders will require that the taxes be paid even if you don’t plan to have taxes in your monthly payment. The title company will “hold and pay” the property taxes. When your closing date is before tax amounts are known, they will hold approximately 110% to 115% of the previous year’s taxes. Whatever amount is collected over and above what is needed will be reimbursed to you once the title company pays the taxes for you. You will receive the applicable discount for paying the property taxes in full. The title company will charge a holdback fee ranging from $50 to $100.
Everything listed here is for prorated taxes only. In addition to prorated taxes, lenders will collect tax “reserves” if you have taxes in your monthly payment. The amount that is collected for reserves will depend on the month that your loan closes. The lender will require 12 months in your escrow account by October plus a cushion for reserves. Except for loans closing during September through October 15, the amount collected between prorated taxes and reserves will equal 10 months.
Your first payment date is determined by the month your loan closes. First payment dates are due by the first of the month and one full month (30 days) after the loan is closed.
For example, if you close in the month of August this year, your first payment is due on October 1 of this year.