What Is A Real Estate Tax Service Contract?

by Angela Lam Turpin ; Updated July 27, 2017
Outsourcing property tax monitoring.

Institutional and private mortgage lenders make loans secured by real estate. When property taxes are not paid by the homeowner, the delinquent tax becomes a lien. Property tax liens take precedence over a mortgage loan. A lender wants to maintain its standing as the priority lien holder, and that means ensuring property taxes are paid on time. A real estate tax service contract assures a lender the property taxes are paid on a regular basis for the life of the loan.

Real Estate Tax Delinquency Reporting

A real estate tax service contract with a reliable tax service company informs the lender if and when property taxes are paid by the homeowner. For a small fee, the tax service company will send the lender statements about property tax payments for the life of the loan. A delinquency letter will be sent to a homeowner if taxes are not paid on time, and a copy of the letter will also be sent to the lender.

Impound Service

Some real estate tax service contracts include an impound account for the homeowner to make monthly payments toward insurance and property taxes. When the tax bill comes due, the real estate tax service will forward payment on behalf of the borrower and send the lender a notice of the payment.

Change of Title

Another additional service may include a report generated when a different owner of record appears on the county tax rolls. A change of ownership might suggest an unauthorized transfer of the property. When ownership changes without the knowledge of the lender, the lender often has the right to call the loan due and payable as part of the terms of the deed of trust.

Tax Redemption Solutions

If a homeowner does not have an impound account and has delinquent property taxes, the real estate tax service may help the homeowner establish a repayment plan with the county. The real estate tax service negotiates on behalf of the borrower the terms and conditions of a repayment plan. Terms and conditions vary from county to county. Check with your real estate tax service contract to see what types of redemption solutions are offered.

Other Services

Some real estate tax service companies offer additional services. Some allow lenders to directly view their accounts and reports online through SMARTWeb. Others offers flood certification for properties located in flood zones.

About the Author

Angela Lam Turpin has been a writer for 20 years. Her articles and essays have appeared in "San Jose Mercury News," "The Sun," and in the book, "Wild Child: Girlhoods in the Counterculture" (Seal Press). She is a licensed Realtor (CA Dept of Real Estate License #01201734) experienced with residential sales, mortgage loans, and foreclosures.

Photo Credits

  • home from dollar image by PaulPaladin from Fotolia.com