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.