How is it determined if I will have Real Estate Withholding?

If you are selling your property, a Franchise Tax Board form (593) Real Estate Withhold Certificate will come to you with your initial paperwork from escrow. This form asks questions that will qualify whether or not it is necessary to send a portion of your sale proceeds to the Franchise Tax Board as prepayment of income taxes. NOTE: If you are selling your primary residence, you have lived in the home 2 out of the last 5 years, you are doing a 1031 tax deferred exchange or are subject to a loss, you will not be subject to real estate withholding.

What is title insurance? (Owner’s Premium and Lender’s Policy) Who pays?

An Owner's Policy of Title Insurance is usually furnished by a seller to a buyer to ensure the buyer that there are no voluntary or involuntary liens of record. Title Insurance is the only type of insurance you can obtain that insures the past instead of future. In the event an item shows up that was for the seller after the policy is issued, the title company would clear that item for the buyer/new owner. A Lender's Policy of Title Insurance is usually purchased by a buyer/borrower as a requirement of a new loan. A Loan Policy insures the lender against loss caused by invalid title in the borrower (ownership) and/or seniority of position on title '

What are prorations and how are they determined?

Proration’s are a debit/credit through escrow for taxes and homeowner's association dues for the current installment. Example: If you are closing escrow in September, 1st installment taxes began 7/1 but are not due yet. The seller would credit the buyer from the first day of the installment (7/1) to the day you close escrow (last day property was owned by seller) based on the latest available tax bill. Buyer will be responsible to pay the full amount of taxes when due in November, but has already been credited from seller for the time the seller owned the property.

What is an impound account?

A reserve account established and paid through your loan for your property taxes and insurance. The amounts are collected with your monthly mortgage payment and are set aside in an "impound/escrow account" Your lender will pay your taxes and insurance when they become due and payable. Lenders Will requ1re you to keep at least 2 months cushion in this account at all times.

Supplemental Property Tax Defined

The Supplemental real property tax law came into effect in 1983 and is part of an ambitious drive to aid California's public school system. If you plan on purchasing or building a new home, this law will affect you. Supplemental property tax is a one-time tax which dates from the time you take ownership of your property or complete construction until the end of the tax year on June 30.

How will the amount of my Supplemental Tax Bill be determined?

There is a formula used to determine your tax bill. Supplemental property tax is based on the difference in assessed value of a home when purchased by the prior owner and the newly assessed value when purchased by you. If you are building a home, the supplemental property tax is based on the difference in value of the land before a home was constructed and the new property value after a home is built.


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