What Is A Real Estate Tax Service Contract?

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Outsourcing property tax monitoring.
Outsourcing property tax monitoring. (Image: home from dollar image by PaulPaladin from Fotolia.com)

Institutional and private mortgage lenders make loans secured by real estate. When property taxes are not paid by the homeowner, the delinquent tax becomes a lien. Property tax liens take precedence over a mortgage loan. A lender wants to maintain its standing as the priority lien holder, and that means ensuring property taxes are paid on time. A real estate tax service contract assures a lender the property taxes are paid on a regular basis for the life of the loan.

Real Estate Tax Delinquency Reporting

A real estate tax service contract with a reliable tax service company informs the lender if and when property taxes are paid by the homeowner. For a small fee, the tax service company will send the lender statements about property tax payments for the life of the loan. A delinquency letter will be sent to a homeowner if taxes are not paid on time, and a copy of the letter will also be sent to the lender.

Letter notifying tax delinquency.
Letter notifying tax delinquency. (Image: letter 2 image by chrisharvey from Fotolia.com)

Impound Service

Some real estate tax service contracts include an impound account for the homeowner to make monthly payments toward insurance and property taxes. When the tax bill comes due, the real estate tax service will forward payment on behalf of the borrower and send the lender a notice of the payment.

Pay taxes through an escrow account.
Pay taxes through an escrow account. (Image: signing check image by jovica antoski from Fotolia.com)

Change of Title

Another additional service may include a report generated when a different owner of record appears on the county tax rolls. A change of ownership might suggest an unauthorized transfer of the property. When ownership changes without the knowledge of the lender, the lender often has the right to call the loan due and payable as part of the terms of the deed of trust.

Notified of an unauthorized sale.
Notified of an unauthorized sale. (Image: ownership handover image by Keith Frith from Fotolia.com)

Tax Redemption Solutions

If a homeowner does not have an impound account and has delinquent property taxes, the real estate tax service may help the homeowner establish a repayment plan with the county. The real estate tax service negotiates on behalf of the borrower the terms and conditions of a repayment plan. Terms and conditions vary from county to county. Check with your real estate tax service contract to see what types of redemption solutions are offered.

Set up Rrpayment plans.
Set up Rrpayment plans. (Image: pay image by sasha from Fotolia.com)

Other Services

Some real estate tax service companies offer additional services. Some allow lenders to directly view their accounts and reports online through SMARTWeb. Others offers flood certification for properties located in flood zones.

Other Services
Other Services (Image: service image by anna karwowska from Fotolia.com)

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