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Property Tax Status at the Time of Title Transfer

When transferring (i.e., selling) a property with an unpaid tax bill at the time of settlement, taxes will be collected by the settlement attorney. Pursuant to Maryland State Law, all real estate taxes must be current (i.e., paid) before the deed can transfer to the new owner. Problems may arise, most often around the time that property tax payments are due in September and December, respectively. If the original mortgage lender sent the tax payment but it is not posted to the account at the time of settlement, payment will need to be collected at settlement in order to pay the property taxes and have the deed recorded. There are two scenarios that affect how the overpayment would be handled. In the event that the settlement payment is made prior to the mortgage lender (assuming the lender uses the mass payment option to pay taxes), then there is no need for the seller to request a refund from the County because the money will automatically be returned to the lender. The seller would then need to contact their lender for a refund. In the event that the settlement payment is made after the mortgage lender has paid taxes, the seller may need to request a refund from the County. The County makes every effort to avoid overpayments (e.g., the settlement attorney's payment is reviewed prior to posting), and will return the check representing the overpayment to the law firm for distribution to the client. However, in some cases, payments may post and be eligible for a refund. In these cases, the seller needs to provide a copy of their escrow analysis from the lender and the settlement HUD1 document as proof for requesting a refund.
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Last Updated: 09/02/2015 13:29:21