Property Taxes

Title companies collect any property taxes that are due at closing. Title companies confirm with the county tax assessor if taxes have been paid or are still due. Taxes that are due will be debited from the sellers sales proceeds and paid directly to the county treasurer or held by the title company until the payment of taxes can be confirmed with the county tax assessor.

Taxes in Colorado are due and payable one full year in arrears. At closing the title company is required to prorate the current year’s taxes from January 1st until date of closing. This pro-ration is shown as a debit to the seller, and a credit to the buyer. This amount is based on one of the following;

Taxes for the Calendar Year Immediately Preceding Closing
Most Recent Mill Levy and Most Recent Assessed Valuation (adjusted
by any applicable qualifying seniors property tax exemption)
Other_______________(an example would be % of sale price)

as defined by 16.1 of the residential contract to buy and sell real estate (2011 version).

In addition, if the closing takes place in the first half of the year, the title company will need to collect the previous year’s taxes from the seller as well. In the months of January and February, the previous year’s taxes are usually still due in full as the first half is due on February 28th. In the months of March through June, we are usually collecting the second half only, as typically the first half has been paid. The title company will call the county right before closing to verify if any amounts have been posted and charge the seller accordingly.

It is important to also be aware that most owners have mortgages, and that their lenders disburse the taxes due each year from the seller’s escrow account at the mortgage company. Many lenders use escrow servicing companies to pay the taxes due at the county each year. The lenders typically pull the amounts from the seller’s escrow account about two weeks to a month before the due date, and then send these funds to the escrow servicing company, who then typically holds on to these funds until right before the due dates at the counties. What happens many times is that the funds have been taken from the seller’s escrow account, but the county is still not showing the taxes paid yet, so the title company will also have to collect from the seller that amount because it is still due at the county. Because title companies are insuring the title, they will require the taxes to be sent in to the county. The client will then be refunded back the funds from either the lender or the title company, depending on which entity’s check cleared the county first.