Selling house, will the buyer payback alread paid taxes?
I own my home, and my property tax is paid via an escrow account funded an additional amount on my mortgage payment. The city requires quarterly tax payments, which the bank makes on my behalf typically a full month before they are actually due. If I sell my house, the property taxes may be paid for the coming quarter, which would be around ,500. What happens to this amount? Do I end up effectively pay the tax on their behalf, or does the amount from future months come back to me somehow?
I'm not sure if it matters, but my tax bill always covers two years. My last one was for 2016-2017, with the first payment in 8/2016 and the last 6/2017.
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In all my real estate transactions property taxes and home owner association dues were handled as part of the closing. The closing agent collected the information regarding amounts and due dates and then as the closing date approached let everybody know how they were to be handled.
You will only be responsible for your portion based on how many days you own the property. This part of the transaction will be handled out of the purchase and settlement funds. It is possible that you will send money to the buyer for your portion, or they will send money to you for their portion. It depends on the due date, and is the item paid in arrears.
This is part of the settlement costs that the loan officer or real estate agent can't nail down far in the future because the total will change day-by-day and they have no idea when the settlement day will be.
Because you are the current owner and many loans require funds for taxes and insurance be kept in an escrow account, that can also factor into the equation. Closing right when the taxes are due can cause an issue because the current lender will be programmed to send out the payment on a specific date, and you don't want to have to chase down the double payment.
The professionals know how to handle this and will be able to explain it to you based on your situation. They are very well versed in how property taxes and escrow accounts work in your jurisdiction.
When I bought my house in MA, I'm pretty sure the already paid real estate taxes were prorated and taken into account with the myriad other payment issues at closing.
For example, if the seller paid 0 of taxes at the beginning of the quarter, and the sale closed one month later, the buyer would pay an additional 0 to compensate the seller for already paid taxes.
I don't know if this is required by state law, was detailed in the purchase contract or what so YMMV...
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