Cook County taxes are supposed to come out in September. Everyone, including lenders, knows this.
Cook County taxes usually come out later and sometimes much later. Lenders don't care.
We are now entering "TI Season". That's the time where lenders begin to require home buyers who escrow their tax payments to place funds in a TI for the second installment of Cook County real estate taxes. "TI" stands for "title indemnity". It is simply an escrow held by a title company so that the title company can provide insurance over some issue. TIs are not only used for taxes, but at this time of year, that is their most common purpose.
The process works like this. The lender says "taxes will be out in September and we will not have our buyer set up in our system in time to make that tax payment, so we will need the title company to guarantee that the taxes for 2009 second installment taxes are paid". The title company says "ok, we'll guarantee that the taxes will be paid, but we'll need to hold some money for those taxes and once the tax bill comes out, we'll pay the bill and return any overage in the TI account to the home buyer".
In order to accomplish this, the home buyer will have to put one and one half to two times the first installment tax bill into the TI account with the title company and will have to pay a TI or title indemnity fee, a fee for a tax bill, and a tax payment fee. These fees regularly range from $150 to $200.
Rumors we have heard say that the tax bill this year may come out as late as December 15, 2010. That means that from here on out in 2010, any buyer expecting to escrow for property taxes can also expect to fund a title indemnity for the second installment of 2009 taxes.
Note: this is not a problem in counties other than Cook County. In all other Illinois counties, the tax bill comes out in one bill and both the first and second installments are already know.
2 comments:
Even if you don't escrow your taxes with your lender the title company / Lender are still going to require a TI. There is no getting around a TI in cook county for second installment.
Actually, I disagree. I just closed a deal last week where the bank itself held the escrow rather than setting up a TI.
Some lenders will, rather than taking 2 or 3 months of a cushion, will take 9 or 10 months and will take care of the impending tax bill rather than setting up a TI.
Finally, in a rare instance, a title company will accept a personal undertaking from a borrower. Rare as it may be, I have seen it happen.
Of course, if there is no lender, there is no issue.
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