Property Taxes Explained for Buyers and Sellers


Property taxes are paid to local councils by property owners within specific jurisdictions and this money is used for maintenance of various amenities within the council. The specifics of when and how these payments are made will not be the same across the board. In fact, there are factors that will change even as you move from one zone to another within a city. In some jurisdictions, these payments are made in arrears.
When a payment is made in arrears, this means that the payment relating to a particular period is paid after that period elapses. This means that the property taxes relating to a year, say 2016, will be due in 2017. Different jurisdictions will have different dates when the payment is due. In some jurisdictions, the property tax can be paid in two half-payments or all at once. Be sure to check with the council in your jurisdictions to find out the specific dates and payment methods.
If you’re still paying your mortgage then your mortgage company will be the one to pay the property tax. Part of the monthly mortgage payment is put into an escrow account specifically for this purpose. When the taxes are due, they will be paid from this escrow account.

For Buyers

If you’re buying a house, the seller of the house is supposed to give you credit for any tax that isn’t yet due. This means that when the taxes are due the following year, you will pay the entire tax for the previous year.
For example, if you close the purchase of a house on June 30th 2017, the seller of the house is supposed to give you a credit on the settlement statements for the prorated taxes covering the time period of January 2017 – June 30, 2017. Therefore, you will be paying the entire tax bill for the year 2017 when they are due in 2018.

For Sellers

If you’re selling a property, you’re supposed to give the buyer credit to cover any taxes accumulated by the property that is not yet due for the period prior to the closing of the sale. This credit is taken as a final settlement. Property taxes due may be different from what was initially rated. However, since the credit was taken as a final settlement, neither party will be said to owe the other money regardless of whether the taxes increase or decrease.

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