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.
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Most homeowners have insurance on their home that additionally, gives them coverage on their personal property. That is the first level of peace of mind to know that it is available to you if there is an unfortunate need for it from a burglary, fire, or some other insured circumstance.
Personal property is handled slightly different than real property. The claims adjustor could start by asking you for a list of the things lost. You are allowed to reconstruct it but there is a distinct possibility that you’ll forget things, sometimes for months or years after the claim was settled.
An interesting exercise would be for you to visualize two rooms, possibly, the kitchen and main living area. Without being in the room, create a list of all the personal items in plain sight and those in the closets and cabinets. When you’re through with the list, go into each room to check to see what kind of things were not on your list and what the value of those items amounted to. It could be substantial.
Remember, you are entitled to claim them regardless of how long it has been since you used them or if you do not intend on replacing them again.
When filing a claim, the more “proof” you have to substantiate it, the better off you are. Receipts are great but chances are, you may only have them for the big-ticket items. Photographs or video of the different rooms are great records that the items were in your home.
An itemized list of each room with a description of the content, cost and date of purchase, supported by pictures would be ideal. This type of documentation will make filing and settling a claim much easier. The more documentation you have, the more likely you are to have a favorable settlement.
The more expensive the item, the better it would be for you to have receipts, serial numbers and photographs. A simple count of some items like clothing will suffice like four pairs of jeans, 24 dress shirts, etc. More valuable items of clothing like a cashmere jacket or a silk dress should be listed individually.
Depending on the frequency that you purchase new items for the home or possessions, you’ll need to consider updating the list and photographs. Moving creates opportunities to get rid of things that haven’t been used for years and to acquire things for the new home. It is always a good idea to complete a home inventory after you’ve moved and settled into your new space.
If you would like to have more tips and a form to itemize your possessions, download the Home Inventory. This will even allow you to include pictures and store it in digital format for safe keeping.
Some homeowners feel like they may as well throw a dart against the wall to decide whether to move or not. Other people might invoke a process attributed to Benjamin Franklin. Supposedly, to evaluate the options and bring clarity to the choice, this American founding father would list all the reasons for and against the decision on a sheet of paper. After reducing it to writing, the choice would appear either by obvious majority or practicality.
Buying a home is an emotional decision but selling a home can be also. Separating the rationale from the emotion can make decisions seem obvious but they may still not be crystal clear.
There is an inventory shortage that caused prices to rise and market time to shorten. In many active markets there is less than 30-days’ supply of homes for sale which is half of what was available a year ago. This will make it easier to sell and maximize the proceeds from your current home.
69% of economists who participated in the first quarter 2021 Zillow Home Price Expectations survey believe home inventory will begin to grow in the second half of this year or the first half of 2022.
Mortgage rates are near record lows which will keep payments at a minimum. With the inflation rate in the United States expected to be between 2-3%, many borrowers consider that it balances with the mortgage rate to be an effective zero percent.
“Consumers are facing much higher home prices, rising mortgage rates, and falling affordability, however, buyers are still actively in the market,” said Lawrence Yun, NAR’s chief economist. “At least half of the adult population has received a COVID-19 vaccination, according to reports, and recent housing starts and job creation data show encouraging dynamics of more supply and strong demand in the housing sector.”
The pandemic has allowed many buyers have the flexibility to work from home for now and in some situations, permanently. That opens new location possibilities options that would not have existed if they had to commute to work daily. Economists believe that the increased preference to work remotely will be a permanent shift even if it is only a part of the work week.
This provides opportunities for homeowners to relocate in an area that doesn’t have the high demand that their current area does and could benefit from more affordable housing for the replacement while possibly, maximizing the sales price of their current home.
Good information specific to your needs is essential to making good decisions. Explore the possibilities with your real estate agent. They can provide facts about the sale and purchase of another home. Once you have the facts, you may use the Ben Franklin Balance Sheet to help you with your decision.
In cooking, “mise en place” describes having all your ingredients measured, cut, peeled, sliced, grated, as well as bowls, utensils and pans ready to use before you begin cooking. The advantage is to inventory the ingredients and recognize if you have everything you need. You are less likely to leave out an ingredient or step because it is “set up” and ready to use.
The same technique works well in the homebuying process, especially in today’s highly competitive environment where multiple offers are normal and bidding wars are commonplace.
Check your credit … not only does credit determine if you will get a mortgage, but it will also determine the interest rate you’ll pay. The best rates are for the borrowers with the best credit; lower credit scores mean higher rates because of additional risk to the lender. Free copies are available from all three major credit bureaus at www.AnnualCreditReport.com.
Determine your budget … knowing your income and immediate living expenses will give you a feel for what you can afford but you also need to know what big-ticket expenses are in the future and how much you should be saving for them. Lenders use debt to income ratios to qualify borrowers, but it may be more than the buyers feel comfortable with. This is good information to discuss with your mortgage professional.
Meet with a mortgage banker … their job is to get borrowers approved and instead of using calculators on a website, a trusted, experienced mortgage professional can look at your credit, make suggestions if it can be improved, run verifications on income, assets and liabilities and suggest loan programs to benefit your specific situation. They can even provide a pre-approval letter and phone verification that may be the tipping point to negotiating a successful contract with a seller.
Initial investment … The down payment and closing costs are related to the type of mortgage, which is generally, dependent of how much of the buyer’s savings is available. The down payment can range between zero and 20%. Mortgage insurance is necessary on most loans if the down payment is less than 20%. Buyer’s normal closing costs range between two to five percent of the mortgage.
Costs of homeownership – Most mortgage payments include the principal and interest plus 1/12 the annual property taxes and insurance plus mortgage insurance if required. Other expenses that will be incurred by the homeowner include maintenance, HOA dues, utilities, upkeep and replacement of equipment and appliances.
Process and timeline … people tend to feel more comfortable when they understand the process of buying a home and the length of time it takes for the different steps. Your real estate agent will be able to provide this information to you based on the type of mortgage and local market conditions.
Know the numbers … being familiar with the basic statistics makes planning and even, negotiation easier to predict. Important data, relative to the type of property you are buying, includes the current supply of homes for sale, days on market, sales price to list price ratio, and percent of cash sales in your price range. This is another area that your real estate professional can be very helpful.
Must-have features … the concept of a “dream home” is more myth than reality. People rarely get everything they want even when they are building a home. Especially, in a highly competitive market with rapidly increasing prices, buyers should create a list of their “must have” and “nice to have” features and amenities. This can be helpful when you are determining whether to write a contract on a home.
Build your team … buying a home is like an athletic team. By selecting the best “players” for each position, you will have a much better chance for a successful sale and a satisfactory transaction. Your real estate agent is in a unique position to guide you through the entire process and recommend trusted professionals for each job that needs to be done.
An excellent meal includes fresh, good food, the right ingredients, superb preparation, and execution. Whether you are following a recipe or doing it from memory, each step is important and affects the outcome. The same is true for buying a home. Get everything together before you start looking at homes.
For more information on buying a home, download our Buyers Guide.