Are You Paying Too Much Into Your Escrow Account?

By
Real Estate Agent with (512) 786-8300

Most of my blog posts are a direct result from my day to day experiences as a real estate broker, and those of my clients. These are real life scenarios, which can be of benefit to others who read the blog. Something that is occurring more often of late, are my clients who report overpayment into their escrow account. Last week, my lender contacted me, to let me know my escrow account will be lowered, thus lowering my monthly payment.

What Is An Escrow Account?

An escrow account is used to collect and hold money, to pay for property taxes, homeowners insurance, or other fees associated with home ownership. A lender often requires some portion of those funds to be paid at closing, and they establish an account, to ensure those payments, protecting their investment as it were. This keeps the home owner from making one lump payment, spreading out the obligation over the course of a year.

But it also gives the lender control over the homeowners funds. If the lender collects an amount that is too high, an overpayment is incurred. Given the cost of a home, we are dealing with a potentially large sum of money. Which means, the lender, in effect, is ysing your money at little to no cost. Multiply that by thousands, if not millions, of buyers; and that is adds up to be a huge number.

Is The Lender Collecting Too Much?

Every year, Americans file their tax return, hoping for a refund, which is actually a return of an overpayment. An escrow refund isn't all that different. The overpayment could simply be a result of the lender collecting too much money to pay for the homes property taxes, or the insurance policy.

But remember, home values dropped 1.7 trillion dollars in 2010. Tax valuations should also drop correspondingly. But did your lender adjust the amount of money paid in to your escrow account?

What Should A Homeowner Do?

A good start would be to investigate your home values. There are several sources online, but a comparative market analysis (often referred to as a CMA) can be obtained by your trusted real estate professional. You will want to check it against how much your taxing authority is assessing your home. Your assessment may be high, low or spot on, but the important thing to do, is verify its accuracy and dispute it, if it's too high. Furthermore, check that mortgage statement that comes in the mail, or online. With millions of customers, you can best believe there are numerous inaccuracies.

One of the most important things a homeowner can do, is perform routine maintenance. We change air conditioning filters, spray for termites and power wash our homes. You know, all the things on that infamous Honey Do List. But we must also practice maintenance on the financial side of our homes. Check your tax appraisal, read that mortgage statement, and always make sure you are being charged correctly.

Posted by

Scott Hayes

Austin Real Estate Agency

Extraordinary Service, For Extraordinary People

Direct: 512-786-8300

www.austinrealestateagency.com

Comments (14)

Tish Lloyd
BlueCoast Realty Corporation - Wilmington, NC
Broker - Wilmington NC and Surrounding Beaches

Scott ~ Excellent advice, as always.  Many homeowners are unaware or just don't know the steps to take to make certain they are not being over-charged.  As a homeowner, it's important to do your homework on this issue and protect yourself and your money.  As I almost always do with your insightful posts - leaning . . .

May 01, 2011 03:25 AM
Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional

Scott...

Interestingly enough, just this week I got a refund check and a lower house payment after an escrow review. Great advice.

May 01, 2011 03:37 AM
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

Luckily (or unluckily) I pay mine direct...and I have to pay tomorrow.  Yuck.

May 01, 2011 03:54 AM
Gina Nugent
Donohue RE - Palm Beach, FL
Real Estate Agent - Palm Beach, FL

I had to ask my bank (Chase) a couple of times to re-evaluate my escrow till they finally re-adjusted....it is not always bad to be a control freak. lol

I hope a lot of people read that and therefore suggest-ed. You might save a lot of people a lot of money with this, Scott!! Great post

May 01, 2011 03:57 AM
Scott Hayes
(512) 786-8300 - Austin, TX
Realty Austin, Broker Associate

Tish- Thanks. It's just one of those topics I rarely hear about, but it so important

Richard- That makes two of us. I like these kind of surprises

Debbie- I don't envy you one bit. I'm sure that will not be a fun day

Gina- There is nothing wrong with being a control freak. Especially when it comes to personal finances. Glad Chase finally listened.

May 01, 2011 04:23 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Scott, great advice, as many probably have an overage sitting in their account!    I got mine adjusted when I got the interest rate reduced!

May 01, 2011 04:30 AM
Jill Sackler
Charles Rutenberg Realty Inc. 516-575-7500 - Long Beach, NY
LI South Shore Real Estate - Broker Associate

Great topic. suggested. I had that happen to me personally.

May 01, 2011 04:37 AM
Shar Sitter
Rooms With Style - Minneapolis, MN
Home Staging and Redesign Minneapolis/ St. Paul, M

Once a year I get a refund check or am asked to pay more. In MN they aren't adjusting the tax values of the homes even if you go in and challenge it. And even though the house has dropped at least 30% in value! A person can show they just paid $350K for a home for example and it is assessed at $450K and they won't change it.

May 01, 2011 05:09 AM
Cynthia Larsen
Cotati, CA
Independent Broker In Sonoma County, CA

Scott - I've never personally had an escrow (impound) account, so I didn't think about too much money being collected for property tax. Great reminder!

May 01, 2011 06:19 AM
Vance Booher
Re/Max Select, SRES - Greensburg, PA

Hi Scott.  Such accounts are the absolute norm in Western PA.  Most Lenders won't do financing without them.  Credit Unions seem to be the exception.  As to expecting lower property valuations as a result of the downturn in the market over the last few years, don't hold your breath around here.  Very few appeals have been successful.  Local communities are fighting tooth and nail to avoid or refuse reassessments unless valuations are truly grossly out of whack.  Still, great advice for consumers and agents alike!

May 01, 2011 07:24 AM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Scott, that seems to be one thing my bank is on the money on & i'd love to have it reduced but no way...but this is great info for those who don't check their financial items ....as you say review and reflect..

May 01, 2011 08:01 AM
Julissa Jumper
Select Properties of Fayetteville, LLC - Fayetteville, NC
Fayetteville, NC Real Estate

Scott: You've given some excellent advice for homeowners and their agents to consider to protect their finances.

May 01, 2011 09:44 AM
Anonymous
Cindy

When is the deadline for escrow over payment refund return?

Thank you

Cindy

Mar 30, 2013 12:10 AM
#13
Scott Hayes
(512) 786-8300 - Austin, TX
Realty Austin, Broker Associate

Cindy,

 

I believe like most things, this is going to be an answer that depends in which state you reside. I would seek an organization such as the American Howmowers Association, http://www.ahamembership.com/html/member/guides/escrow.pdf, to give you additional information.

Mar 30, 2013 12:22 AM