For BuyersFor HomeownersFor SellersKing County Real EstateReal EstateReal World Real EstateWA real estate October 28, 2010

If You're Closing on Your Home When Property Taxes Are Due, Could You Pay Twice?

Closing near the time your property taxes are due? With the second half payment due at the end of October, it reminded me of what happened to a client of mine who was closing on the sale of her home near the time property taxes were due.

Here’s what happened:

Bank of “You Know Who” and escrow each paid the first half of the taxes of $2200+.  Bank of “You Know Who” had been instructed to not pay the taxes, but apparently did anyway.  So two tax payments were made to the county.  The county would not refund the money because there’s a law which does not allow a refund for an overpayment in taxes, if they were paid by a third party company, which was the case in this situation. The payment was automatically applied to future tax payments, even though the seller no longer owned the home.  The buyer was the beneficiary of the double tax payment, since they now owned the home, not the seller!

The seller talked with both the bank and escrow many times in an effort to get reimbursed.  The escrow company did try to work with both the bank and the county to resolve the issue.  However, since neither the bank nor escrow had the money, because they had paid the county, neither party would reimburse the seller for the money.

State law on this subject specifically prohibits the county from issuing a refund. The statute was amended in 2005, in response to input from many counties in Washington.  The counties did not want to be placed in the middle of such business transactions.

This is the state RCW and specific line in the code:

RCW 84.69.020

Grounds for refunds — Determination — Payment — Report.

However, no refunds as a result of an incorrect payment authorized under subsection (8) of this section made by a third party payee shall be granted.

There was a stalemate.  Neither the bank nor escrow would repay the seller and the county could not by law.

My seller called me to let me know what had happened.  I suggested contacting the buyer, who now had a credit for the 2nd half tax property payment.  I contacted the agent who represented the buyer and she, in turn, contacted the buyer and explained the situation.  The buyer was able to verify the overpayment and subsequent credit for the tax payment.  Fortunately, the buyer was accommodating and refunded the seller the overage.  This seller, after some stressful time dealing with this issue, was lucky.

Be careful when closing near the end of April or October, when tax payments are due. If your bank is responsible for paying your taxes, make sure your bank does not pay the tax bill. Escrow is responsible for doing so as part of the closing process.  It won’t be easy getting reimbursed if two payments are made.

Have you heard of other situations like this?