Back Taxes: What to do (Repost)

[Isaac Harsh]

Hello, Apparently I accidentally posted this topic in the wrong forum, so I will repost in the proper forum now. As I have decided in the past mo this to peruse real estate, my mom has been supportive but telling me about stuff to look out for. She has mostly been harping on me about back Taxes. So, I was wondering how you all deal with back Taxes or if you avoid properties with back Taxes.

[Michael Plaks]

Originally posted by @Isaac Harsh:

Hello,

Apparently I accidentally posted this topic in the wrong forum, so I will repost in the proper forum now.

As I have decided in the past mo this to peruse real estate, my mom has been supportive but telling me about stuff to look out for. She has mostly been harping on me about back Taxes. So, I was wondering how you all deal with back Taxes or if you avoid properties with back Taxes.

Unless your Mom is an experienced investor herself, there're more reliable sources of learning the business than the well-meaning mishpocha. ;)

Back taxes mean that the seller owes local property taxes that he has not paid. The taxes are attached to the property, not to the person. Once you buy the property, you become liable. Now you have to pay the taxes that the seller should have.

There're two ways to deal with it.

1. If there are liens filed by the tax authorities - then you usually cannot buy the property without paying them. The taxes have to be paid at closing. Normally they come out of the seller's pocket, but it has to be agreed in advance - or the closing will collapse. Basically, you have to tell the seller: I'm paying $X for your house, but whatever taxes you owe will come out of this amount at closing, so you will receive less.

2. You simply build these taxes into your calculation when negotiating. You have to buy low enough where you can pay the taxes out of your pocket and still be profitable.

Your Mom may have heard some horror stories about people buying properties without realizing that the seller is behind on taxes. Then the tax bill comes as a shock after you already bought the property. It is bad. Well, just do your homework before buying. :)