I'm closing on the sale of a flip tomorrow and the title company is telling me that my proration of school taxes is based on the 2% discount, even though I didn't pay the full amount OR pay early enough to receive the 2% discount.
Here are the details:
The property is in Woodland Hills School District. Year runs from 7/1/2020 through 6/30/2021. Annual taxes are $2365.04. Because of the timing of this closing and the fact that this was supposed to close in October, I choose to pay an installment (so I paid $788.36 or one third). Obviously, there is no 2% discount on an installment.
Since the school year runs from 7/1 through 6/30 and I'll own the house for five months during that time, I am responsible for about $991.44. Of that amount, I have already paid $788.36, so I should owe an additional $203.08. However, the title company is telling me different. In the end, it's about a $30 difference. It's not the end of the world, but it makes no sense to me.
What the title company is showing on the HUD is a DEBIT of the full year amount (with no discount). So that's a debit of $2365.04. Then, they are only crediting me back as if I paid and received a 2% discount. They told me it's "industry standard."
I've been on the other side of this and was specifically told if the 2% discount was not taken advantage of, then the buyer does not get that benefit...which makes sense to me.
Not a lawyer, but will email mine to check (doubt I will hear back by your closing though), but the tax certification should show what is paid and what is owed from the tax collector and that number be used.
Are you using a local title company or one out of state by chance? I have run into issues having to correct national ones or do their work for them on other occasions.
Just take this reasoning to the logical conclusion. You paid in full, after the discount window. Your title company now debits the discount amount. Your refund will not be what is owed you EVER - will will always get shafted. The only way I could see their argument is if the discount window is still open and they are paying the discounted amount out of escrow. Which I think it expires on Halloween but don't quote me.
Thanks @David Lee Hall, III . The title company is local. And I get that I'm not going to get back the full amount. The part that I don't agree with it, is they are giving me 2% less back than what I should receive, as if I paid the taxes early to get the 2% discount. They are telling me that's standard. I emailed another title company last night and they told me this is in fact how it's done...which is really baffling to me. Oh well. It's not a lot of money. I just wish it made sense!