Real Estate Taxes Paid By Seller At Closing
When purchasing a home, one of the many costs to consider is real estate taxes. These taxes are paid to local governments to fund public services such as schools, roads, and emergency services. The amount of real estate taxes paid by the seller at closing can vary depending on the location of the property and the terms of the sale.
What Are Real Estate Taxes?
Real estate taxes are taxes assessed on the value of real property, which includes land and any structures on the land such as homes, buildings, and other improvements. These taxes are typically collected by local governments, such as cities or counties, and are used to fund public services and infrastructure.
Who Pays Real Estate Taxes?
In a real estate transaction, the buyer and seller are responsible for different portions of the property taxes. The seller is responsible for paying the taxes up until the date of closing, while the buyer is responsible for paying the taxes from the date of closing forward.
How Are Real Estate Taxes Calculated?
The amount of real estate taxes paid is based on the assessed value of the property and the tax rate in the area where the property is located. The assessed value is usually determined by a local assessor's office, and can be based on a number of factors, such as the size of the property, the value of any improvements, and the location of the property.
When Are Real Estate Taxes Paid?
Real estate taxes are typically paid annually, and can be paid in a lump sum or in installments throughout the year. In some cases, the taxes may be paid by the mortgage lender as part of the monthly mortgage payment, and then the lender reimburses the local government.
Real Estate Taxes Paid By The Seller At Closing
In most cases, the seller is responsible for paying the real estate taxes up until the date of closing. This means that the seller will be required to bring a check to the closing to cover the amount owed for the current tax year. The amount of taxes owed can be prorated based on the number of days the seller owned the property during the tax year.
Proration Of Real Estate Taxes
In most cases, the real estate taxes are prorated between the buyer and seller based on the number of days each party owned the property during the tax year. For example, if the tax year runs from January 1st to December 31st, and the closing date is August 1st, the seller would be responsible for paying the taxes for the first 7 months of the year, and the buyer would be responsible for paying the taxes for the remaining 5 months of the year.
Escrow Accounts For Real Estate Taxes
Some lenders require borrowers to set up an escrow account for real estate taxes and insurance. This means that a portion of the borrower's monthly mortgage payment is set aside in an account to be used to pay the taxes and insurance when they are due. The lender then pays the local government directly from the escrow account.
Conclusion
Real estate taxes are an important consideration when buying or selling a property. The seller is typically responsible for paying the taxes up until the date of closing, and the amount owed can be prorated based on the number of days each party owned the property during the tax year. By understanding how real estate taxes work, buyers and sellers can avoid any surprises at closing and ensure a smooth transaction.