Closing on January, Who pays for prior year property tax?

Question

I will be closing on my first property in the last week of January. Do I have to pay for the prior year's property tax?

Alex Bok · Answer

Account Closed taxes should be prorated from when you started to own the home

Fred Heller · Answer

Account Closed   You do not have to pay for the previous year taxes because you didn't own the home.

Property taxes in Texas are paid in arrears, so 2016 tax payments are due in January 2017.

Let's say you close on Jan 31. You will be responsible for the property taxes due in Jan 2018, but the seller will be responsible for the prorated taxes for Jan 2017. You should receive a credit from the seller for one month's taxes when you close.

Andrew Postell · Answer

Account Closed you only pay for taxes when you start owning the home.  The seller will be paying for 2016 taxes for Texas property taxes and you will be responsible to start paying when you take possession.

Account Closed · Answer

Thanks everyone for the input. Different state rules had me confused.

Roger Wilson · Answer

Taxes are ALWAYS negotiable....  Since they vary in different areas/states, then it only matters what is in the CONTRACT.  Write it up however you wish, however - you can only have them pay what is actually OWING - if the tax bill hasn't been issued, then you can;t have it paid....

Kim Tucker · Answer

When you buy a home in Missouri, you only pay for the taxes while you own the home, UNLESS you negotiated something with your seller.

If there is no clauses to define how the taxes are paid -

If you buy in December, the title company is going to charge YOU the buyer the full amount of the taxes to pay the bill for the whole year and then credit YOU with a proration from January 1 to the day you buy it from the seller.

When you buy in January or at any time after the taxes were due (December 31) the title company is going to take all the previous years taxes and late fees out of the SELLER proceeds.

When buying through out the year - you will see a line item on the HUD or Settlement Statement or what ever they are calling it this year that charges the seller from January 1 to the day of closing and credits the amount to the buyer - then the buyer gets the tax bill to pay at the end of the year.

If you buy on the courthouse steps - this goes out the window - if you buy a house at foreclosure sale and the taxes have not been paid - sometimes they get paid by the bank system after you buy - but for the most part you are the new owner and stuck with the taxes owed as well as any unpaid  - city fees like - unpaid utility bills from city owned utilities - like water in KCMO, board up fees, tear down fees or mowing fees for any building maintenance done by the city.  Foreclosure wipes out liens like loans and judgments, but does not touch taxes or city billing - you inherit those from the previous owner in the foreclosure.

Now what if you DID NEGOTIATE something with the seller.  I see ads from investor buyers all the time that says WE PAY EVERYTHING which means you are going to pay all their closing costs and back taxes and will have something to that effect in your contract, in which case you get all of those fees.  If you say you are going to pay everything, make sure you know what everything is before you write the contract or put a dollar amount limit in your contract - maybe buyer will pay all seller's fees and back taxes up to $2,000.

Hope this helps.

Jeff Greenberg · Answer

You are correct, as I said I don't know the appeal timing.  My partner was always in charge of that.  I did want to make the point that investors should always appeal.  I might have been slightly off of the topic.

Greg H. · Answer

Based on the OP, a tax protest could not effect this scenario.  Property tax protests are filed by May 31st at the earliest(or 30 days after value is delivered) and would be long resolved by the time the tax bill was sent out in October.  Commercial property protests can be delayed due to be elevated to District Court but would not be the case in this scenario

Jeff Greenberg · Answer

Find out if the seller appealed his taxes. You will get the benefit if he did.  I don't know what the dates are for appealing.  In Texas we appeal every year.  It only costs 25-30% of what they save you.  If they save you nothing, you pay nothing.  When we bought our property for 1.3 mil it was assessed at 2.1 mil.  We appealed it down to 1.3 and saved quite a bit of money.

Greg H. · Answer

The 2016 Property Tax bill was sent out late October and needs to be paid by Jan 31 2017. The title company will collect from the seller's proceed and pay the taxes. You will also receive a pro-rated amount of the 2017 Property taxes from Jan 1st thru the date of closing in the form of a credit on the settlement statement. You will then be responsible for the 2017 property taxes

Closing on January, Who pays for prior year property tax?

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