Understanding Property Taxes

Property tax revenue supports public schools, county governments, special districts, municipal governments and junior colleges. All of the revenue generated by property taxes stays within the same county. 

The property tax bill is based on the assessed value of the property, not the market value. The county assessor is responsible for discovering, listing, classifying and valuing all property in the county, in accordance with state laws. The assessor multiplies the home’s market value by a percentage called the assessment rate to arrive at the number on which taxes will be based. Colorado counties reassess property values every two years.

Property taxes are an expense owners will continue to pay every year for as long as the home is owned, even after the mortgage is paid off. When it comes time to sell, many buyers will look at the tax bill as a key consideration when deciding whether to purchase the property.

There are two reasons why Land Title addresses property taxes.

For one, in Colorado, unpaid property taxes have priority over all other liens, including deeds of trust. The Mortgagee’s Title Policy we commit to issue insures the lender that they have a first position (in the case of a traditional purchase with a loan) lien on the property. This means we must pay all outstanding property taxes at closing.

Second, it is in the Contract to Buy and Sell and, as a title agency, we are beholden to the contract. Paragraph 14 addresses the Payment of Liens and Encumbrances. It states “Unless agreed to by Buyer in writing, any amounts owed on any liens or encumbrances securing a monetary sum against the Property or Inclusions, including any governmental liens for special improvements installed as of the date of Buyer’s signature hereon, whether assessed or not, and previous years/ taxes, will be paid at or before Closing by Seller from the proceeds of this transaction or from any other source.”

Year End Closings regarding Taxes

In December, county treasurers offices will close down. This means they stop issuing tax certificates and start working on taxes for the next calendar year so that the exact tax amount is unavailable until certification is complete, which is typically mid-January (each county is different). With taxes due as of January 1, Land Title will escrow from the seller 150% of the prior year tax amount until the certified tax amount is available. These will be short-term escrows and no escrow set up fee will be charged at this time.

New Build Taxes

New build taxes are a bit more complex. Since it is a new home, there will not be an assessed value for the property yet. Therefore, the taxes are based on vacant or partially improved land only. Land Title still handle taxes the same – by paying outstanding prior year taxes and prorating the current year.  

For the proration, we follow the instructions outlined in the purchase contract, which is typically a non-standard builder contract.

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