Mistake #4 - At Closing, I want to Make Sure the Sellers Have Paid Their Fair Share of Taxes!

At closing, it is the job of the Title Company to help determine the tax liability for the current year when the actually tax bill has not been issued. For example, the tax bill for the current year usually comes out around October. (Check your local city and state). If you close prior to this bill, the Title Company has to then estimate the tax liability. The decisions are always based upon historical data. That is, what was paid last year. This estimate could certainly pose a problem for the buyer if the title company did not estimate enough. That means the buyer may have to pay a portion of the taxes that was due from the seller. There is a document that both the seller and buyer signs off at closing that states that both parties agree to address the tax differential once the bill arrives. This requires the new homeowner to make contact with the old seller and ask for the difference. This means you have to hope the seller will be responsible and pay the difference. The Title Company will not get involved to resolve this issue if it becomes a problem. So it is always best that as a buyer the title company has taken out enough to address the estimated taxes.

How does one determine if enough monies were taken out to pay the taxes? I would suggest looking at the appraisal districts records and seeing if the appraised value and tax rates of the home increased or decreased. If any of these areas increased this is where it becomes important that the amount estimated reflects an increase over last year’s taxes. You can gain more information on this subject in our book entitled make No Mistakes About…Buying real Estate!