Important Tax Information for Escrow Transactions

If you have a transaction currently in escrow or about to open, the following tax-related tips are important to ensure a smooth closing process:

1. Check Property Tax Status
   Contact your California Diamond Escrow Officer or your title company to confirm whether property taxes are paid or still open. They will guide you on any necessary steps.

2. Do Not Pay Outstanding Taxes Directly
   If a tax installment is still unpaid, do not pay it directly. Instead, prepare a cashier’s check or money order made payable to the County Tax Collector. Send this payment to your escrow company at least 3 business days before the delinquency date. This allows escrow to verify the payment and helps avoid delays of up to 6 weeks or the risk of double payment.

3. Paying Taxes at Close of Escrow
   Any new tax bill installment can be paid out of the proceeds at closing. However, if escrow closes after the tax delinquency date, a penalty of at least 10% will be applied.

4. Proof of Payment
   If tax payments can't be verified but the seller claims they were made, the seller must provide cancelled checks or other proof of payment to avoid delays.

5. Lender Impound Accounts
   If your lender manages an impound (escrow) account, they will typically pay taxes before the due date. However, if the loan is paid off before the tax due date, the lender may use the tax funds they’re holding to reduce the loan payoff—meaning taxes may still be unpaid.

 
At California Diamond Escrow, we’re here to help guide you through every step to ensure your escrow closes smoothly and on time.