What if tax bill increases just after closing?

Question

So I closed on a property July 18th. On August 5th I get a call from the mortgage servicing company that they went to pay the taxes on the property and there is a discrepancy of nearly $600 and that I should visit the tax assessors office to see what's going on. I did and it turns out the property was recently revalued and increased significantly.  A notice was sent out (to the seller) earlier in the year informing them of the revaluation and the process to dispute it.  It was not disputed and now the window for doing so has passed.  So the taxes due for this year are significantly higher as a result.  Apparently, the new tax bill came out on July 24th, 6 days after closing.  The attorney used last years tax bill to calculate the settlement.  As a result, I seem to be on the hook to pay the additional taxes even though they should have be pro-rated.  Do I have any recourse here?  Should I just pay the difference and chalk it up as a valuable lesson learned?

Brian Corbett · Answer

Unfortunately there isn’t much you can do about it.  Some counties will allow you to appeal the tax assessed value with no guarantee of an adjustment.  A good tip here would be to contact your tax assessors office prior to closing to find out when the next assessment is scheduled to occur.

Brandon Lockard · Answer

To answer some of the questions raised: This is in Rowan County, NC.  The value of the property was raised over 50% during the revaluation.  The new tax bill did not come out until after the closing, so settlement was done and seller had rode off into the sunset.  The $600 increase is not the pro-rated amount, but this is one of my beefs.  I'm having to pay the entire amount of the increase, not the prorated amount which would have been less than half since I closed in late July.  So I really have two separate issues: 1) The revaluation is WAY inflated, an increase of over 50% and well above what I just paid for the property.  2) I'm having to pay the full amount of the additional taxes, not the prorated amount since the most recent tax bill available at time of close was last years'.  This fall I will have a chance to dispute the revaluation for next years taxes and should have a solid argument based on the fair market purchase price I paid and the recent appraisal I now have.  As for the $600, I'll just pay it and know what to look for next time.  This is my first investment property, so if this is the worst that happens, I'll be good.  Always more to learn.  Thanks for your feedback.

Wayne Brooks · Answer

Your closing documents having language, buried somewhere, Both parties agree that the proration at the time of closing was based on projected/current taxes....and that if the y changed, both parties agree to make the correct adjustments afterward.  Talk to your title company/closing attorney.

Chris Martin · Answer

That's some high $ taxes if $600 is the delta between the old and new, prorated for less than a half year. Below is what is in a "standard" 2-T offer form. I don't know if you used that or some other contract.

Talk to the closing attorney to see what can be done. You may be able to get an adjustment post-closing, but don't hold your breath. The wording in the above does not mention differences between annual levies and how that proration works. There's got to be a precedent somewhere...

Jason E. Smith · Answer

Sorry to hear that Brandon. Where was the property located?  I know it was highly talked about that Charlotte was reevaluating property values. Did you have a realtor?  I agree with Brian that there’s not much you can do from a recourse monetary standpoint but there’s plenty to do from a social media reputation standpoint. Because most likely the realtor and attorney knew values were being reassessed. Their failure to inform you is negligent and should be shared with others. You can call the realtor and attorney and openly share your frustration, tell them you won’t be a client anymore and then share your experience on the internet to warn others. It won’t help offset the taxes but it will hurt their reputation and help others from making the same mistake. Best of luck!  Real estate is forgiving so keep moving forward and this will all be far in the rear view soon!

What if tax bill increases just after closing?

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