This is the fourth video in a series we're doing to help homeowners understand why it's important that they participate in the property tax protesting process. Reason four is that it's necessary to manage what is likely your largest single expense. If you don't protest, you are at increased risk to experience unnecessary growth in the amount of your monthly mortgage payments, due to the escrow mechanism in place for many homeowners.

Once again, my twin brother and I live in Utopia County and things are going great, especially for him. He struck oil in his backyard and found gold in the front. Due to his increased cash flow, he decided to de-lever, and pay off the mortgage on his house.

Not having been as fortunate in the discovery of natural resources, I continued to make my normal payments to the bank of $1.25. That consisted of $1.00 of principle and interest and 25 cents of property tax escrow. Over the course of 12 months, my escrow balance built up to $3.00. When it was time to actually pay property taxes, the bank was billed on my behalf and they paid the tax bill of $3.00 from by escrow account. This system has been put in place to protect the bank's interest, but unfortunately it shields me from and desensitizes me to the amount of property taxes I'm actually responsible for paying. My brother on the other hand, because he has no mortgage, was billed directly and he paid the $3.00. And let me tell you in no uncertain terms, there was sticker shock for him. He had never really thought about how large his property tax bill was, relative to his other expenses.

Due to his new revelation, my brother decided to protest his property tax assessment the following year, and that's how we arrived at scenario two in the video There's Excess Taxation Without Participation. My brother protested and I didn't. The conclusion of the matter was that he shifted a dollar of the property tax burden onto me, so that I am now responsible for making a $4.00 property tax payment and he only pays $2.00.

Now the bank does not track what happens during the property tax protesting season, so I continued to make my payments of $1.25. However when the bank received my property tax bill from the county tax assessor collector, it was higher than the $3.00 expected. The bank still made the entire payment of $4.00, but set out to recoup the overage amount from me by increasing the escrow portion of my monthly payment for the next twelve months.

It was actually a double whammy! My escrow account was in effect overdrawn by $1.00 and the bank had also raised its expectation of the property tax bill to come the following year from $3.00 to $4.00. So my total escrow contributions increased from $3.00 to $5.00. $5.00 equates to a monthly escrow payment of 42 cents. The seventeen additional cents I was required to pay represented an increase of 14%. Many families are not able to manage such changes and volatility in their monthly expenses. Fortunately, I was able to handle it, but rest assured that I was not happy about it.

So I began making my new monthly mortgage payments of $1.42, but as soon as I had the chance to act, I did. The result was scenario 3 in the video There's Excess Taxation Without Representation. The conclusion of which was that my brother and I both filed protests, and ended up with equivalent results and property tax payments of $3.00. So when the bank received my property tax bill, it was for $3.00. Because the bank paid less that it had anticipated having to, a balance of $1.00 remained in my escrow account. That money belongs to me and was returned through the escrow reconciliation process that is performed each year.

So what does all that mean? Your property tax bill is likely the largest single expense you're responsible for paying each year. If you escrow your payments for property taxes and insurance with your mortgage lender, don't let that buffer numb your sensitivity to the opportunity to manage the expense. By participating in the process, you can prevent unnecessary escalation in your monthly mortgage payments over the long run. And that's one more reason to participate in the property tax protesting process!

Visit us at www.iProtest.org

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