The property tax is tax paid on property owned by an individual. This tax is calculated by the local government where the property is located and paid by the owner of the property. The tax is usually based on the value of the property, including land.
When homeowners take out a mortgage to purchase a residential property, the lender often establishes an impound or escrow account to collect property taxes and insurance premiums. This is because property taxes are a recurring expense that needs to be paid annually or semi-annually. Homeowners make monthly payments to the lender, which includes a portion of the estimated property tax bill. The lender then pays the property taxes on behalf of the homeowner when they become due. This ensures that property taxes are consistently paid and helps prevent property tax liens, which could impact the lender's collateral.
Non-payment of property taxes can lead to tax liens on a property. In the event of a tax lien, the local government may place a claim on the property, potentially leading to foreclosure if the homeowner does not settle the debt, which is why lenders collect property tax payments through escrow accounts to ensure they are paid on time.
Whether the lender establishes an escrow account or not, taxes are a recurring housing expense and are therefore considered when assessing a borrower’s ability to make monthly payments. Taxes are an important part of the PITIA and the Front-End DTI ratio.
A property tax cert is an official document provided by the county tax assessor’s office that provides information regarding the property taxes owed on a specific property. County property tax certs are used during real estate transactions to inform buyers or lenders about the property’s tax obligations. They are typically obtained during the Loan Setup milestone, through a search of the county’s public assessment records by the lender or through a request from the Title Insurance Company.
First, locate the subject property’s county information in Encompass. You can do this several ways, although it is recommended to go through Borrower Summary || Enhanced or 1003 URLA – Lender:
Go to Forms > Borrower Summary || Enhanced and scroll down to the Subject Property Information section.
Go to Forms > 1003 URLA – Lender.
After you have identified the subject property’s county, search online for the county’s Tax Assessors Office property directory. Each county’s Tax Assessors Office website is very different, so become familiar with as many county websites as possible, starting with the counties and states you most commonly work with. Some county websites are more difficult to navigate than others.
In this guide, we will use the property located at 1236 Atlanta Rd, Marietta GA 30060 as an example.
Once you have located the county’s Tax Assessors Office property directory, search for the subject property. On most county’s property directory, you can search for properties by:
Owner’s Name: You can use the seller’s name on Tools > File Contacts in Encompass, or as written on the purchase contract.
Street Address: (Recommended) Search by street and number. You can copy this from the Encompass loan information banner by double-clicking the address and pasting it (Ctrl + V) on the search field.
Assessor’s Parcel Number (APN): You can sometimes find this on the purchase contract as APN or Tax Parcel ID.
Many property directories have an auto-complete feature on their search fields.
Once you are in the subject property page, locate the property tax records section, or the Tax Records or Tax Bill history subpage. Do not confuse the tax records section with the property assessment section. The tax records section or subpage will show the status of the latest year’s taxes and tax payment amounts.
Once you have located the property tax records section, or the Tax Records or Tax Bill history subpage, verify the most recent yearly tax payment amount. Try to identify the frequency of tax payments. If you are looking at a tax bill and it doesn’t show prior tax payment dates, search for prior tax bills, and compare the payment dates.
Upload the tax certificate search to Encompass. You can do this in one of two ways:
Print the page and upload the resulting PDF to Encompass.
If the website has the option, print the actual tax bill PDF and upload it to Encompass.
In Encompass, go to the eFolder and upload the tax bill to the Tax Cert bucket.
Go to Forms > Borrower Summary || Enhanced, scroll down to the Transaction Details section, locate the Total Monthly Payment line, and click the Edit icon to open the Total Monthly Payment window. Add the monthly property taxes amount to the Property Taxes line.
