A new law now mandates the disclosure of "supplemental property tax" bills in California to help keep home price sticker shock from lingering beyond the close of escrow.

With the cost of homes so expensive in California, the property tax -- based on the assessed value of the home -- can alone be a deal-breaker in the purchase of an otherwise barely affordable home.

Here's how: the median price of a home in the Golden State was nearly $550,000 by year's end, according to the California Association of Realtors. With property taxes in many areas at 1.25 percent per year, that's an extra $6,875 a year or about $570 a month. In most cases, the latest assessed value is based primarily on the most recent purchase price of a home.

If you purchase a median-priced home with 20 percent down and a 30-year mortgage with a 6 percent fixed-interest rate you are already out about $2,600 a month for the mortgage. Tack on another $570 in property taxes and you could break your budget.

It doesn't stop there.

Unfortunately, your annual property tax bill may not necessarily be all you owe the assessor in that first and often most financially trying year of home ownership.

There's also something called a "supplemental property tax" which is based on the difference between the property taxes the seller paid and the likely larger property taxes you'll have to pay.

You pay some portion of property taxes due while you are in escrow, but those payments are based on the seller's old assessed value until the county assessor gets around to assessing your home based on the new price.

Some time after escrow closes, the new property tax level kicks in and you'll get a prorated property tax bill called a "supplemental property tax" bill. It is a prorated amount based on the number of months left in the tax year of the purchase and your new assessed value.

Depending upon when you buy your home, your supplemental property tax bill and your regular property tax bill could arrive at nearly the same time. The bills typically are payable in two installments, but facing two sizable property tax bills while settling into expensive housing payments can be overwhelming.

"Believe me, if you were not advised of this prior to closing, you are in for an expensive surprise," said California Assembly Representative Jenny Oropeza-D Carson.

Oropeza sponsored Assembly Bill 459, which the state Legislature passed last year. Governor Arnold Schwarzenegger signed the bill into law on September 29, 2005.

Effective Jan. 1 2006 the new code mandates that your home sales contract includes a disclosure about the supplemental property tax.

Previously, "Nothing in existing law ensures you are given a heads-up notice of one of life's biggest expenses," Oropeza said.

California Association of Realtor's "Notice of Your Supplemental Property Tax Bill (SPT)" form satisfies the requirement of the new law and gives home buyers the following information.

• Property is reassessed when ownership changes and the assessment could trigger a supplemental property tax bill you'll have to pay as the new owner.

• The supplemental property tax bill will not be sent to the lender, even if the lender is collecting property tax payments from you as part of your monthly mortgage payment.

• If you are having your lender collect property tax payments from you, the lender will not pay the supplemental property tax bill. You are responsible for making supplemental property tax payments to your assessor.

The disclosure doesn't help you calculate the amount of your property tax or supplemental property tax payment -- see your assessor or tax professionals for help in that matter -- but it should help prompt you to learn those amounts.

When it comes to buying a home, you should know your full costs before you close escrow.

Published: January 3, 2006

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.