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Amun Chiong
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A shortage in my escrow account. What should I do?

Amun Chiong
Posted Nov 19 2023, 10:43

Good afternoon, I recently turned my primary residence into a rental property. During the process, I was notified by my bank that I had a shortage of the amount that was due or it would be spread out for the next 12th months. My escrow account wasn't able to cover the amount because of an increase in property tax. I was able to pay some of the shortage down and was going to pay the rest off. However, I got my statement saying how much my mortgage would be for the next 12 months including the shortage amount. It came out to the exact amount my tenants are paying for rent. I started thinking maybe I could just let them pay off the shortage amount and forget about paying the shortage off right now. Is this a good idea? Either way, I was going to pay it but instead, my tenants are paying the shortage spread for the next 12 months.

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Clayton Silva
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  • Lender
  • California
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Clayton Silva
Pro Member
  • Lender
  • California
Replied Nov 21 2023, 16:29

This is an unfortunate situation that happens pretty frequently.  You have a few options: 1) do as you are and let the tenants pay the difference so you may not make much if any profit, but they will pay the shortfall.  2) You can typically contest the assessed value of the home with the county.  ESPECIALLY in this market with home prices falling a bit in some markets, and affordability going down, you probably have a decent case against the county to get the assessed value reduced a bit so you don't have the shortage.  3) You can pay the difference in full up front like you mentioned

I would at least give the county a call to see what the process for contesting looks like

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Replied Jan 16 2024, 11:52

Is it better for YOU to pay something off today or make payments? 

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