2008 taxes used for 2010 closing?

Diane: After we closed on our property we discovered the title company had made an error when they did the title search regarding the taxes. They said they based them on the 2008 taxes because the 2009 tax bills were not out yet, we closed Feb. 22, 2010. They said their title search found the 2008 taxes were $1130 when in fact the 2008 taxes were $2950. The amounts that were allowed for taxes during closing was short by over $1,800. We purchased title insurance with the understanding that this would cover us in the event of an error such as this. Who should be responsible for the under payment for the taxes? We went to the title company first, they jerked us around for several weeks before they finally submitted the claim to the title insurance company, now I think we are being given the run around by the insurance company. We just need to  know who should be responsible for compensating us for the $1,800 owed for 2009 taxes.The title company who made the error, the title insurance company or the bank that we purchased the property from? Does the title insurance company represent us if we need to recover the tax money from the bank? No one seems to be giving us any answers. Thank you for any information you  can give us regarding this error. Kris

Hi, Kris:  Here are some general comments that might be helpful.  Find out when the 2009 taxes were due at discount.  That date is crucial.  If the taxes were due at discount before the date of the issuance of your title insurance policy, then you've got the basis for a claim against the title insurance company.  Most title policies contain an exception for taxes that are not yet due and payable, so if the bills came out after your policy was issued, then this typical exception would negate a claim.

If the issue is that the taxes were underestimated when setting up a lender escrow account or perhaps underestimated in the tax proration calculations between you and the seller, that's really a harder case for assessing blame.  Presumably the real estate agent or the seller would have provided tax figures when you viewed the property.  Any reasonable person looking to purchase property would consider the cost of taxes when negotiating price. 

The title agent has no personal knowledge of the property and so if there is an error that could or should be recognized by the parties at a closing, the parties - seller or buyer or real estate agent - have an obligation to point out the error.

Taxes do change from year to year and title agents rely upon the best information available which is usually a tax certification from the tax authority.  You might ask for a copy of that certification so you can better understand what happened.  Sometimes the tax collector quotes incorrect information.  Sometimes the title agent hasn't done a good job of getting up to date info.

I hope this helps.  Good luck with it and thanks for reading. ;)

Diane