The tax exemption dropped off after transfer. Escrow ate the whole spread.
Payment went from $1,412 to $1,741 in month ten and nothing about the loan changed. I was keeping the file on a sub-to for an investor I do coordination work for, so this one is on me.
The house had a homestead exemption plus a senior assessment freeze the seller had been sitting on for eleven years. Assessed value was $118k against a market value closer to $240k. The deed transferred, the county caught it at the next roll, both benefits came off, and the tax bill went from $2,010 to $5,380. The servicer recalculated escrow, spread the shortage over twelve months, and the payment jumped $329. Underwritten cash flow was $265. So the deal ran negative for a year and thin after that.
What it cost: $3,948 of negative in year one, plus the investor pulled the second file I was working and I ate about 34 hours of unbilled time.
Exemption and reassessment rules vary a lot by state and sometimes by county, which is exactly why I should have treated it as a line item instead of copying the seller's current payment into the model. What I do now is pull the tax card, write down the exemptions by name, and re-run taxes at full assessed value with no exemptions before anyone signs anything. If the deal only works at the seller's tax bill, it isn't a deal.