It is an annual event...every year at this time, the phone rings with calls from our buyers:
"I just got a property tax bill for the whole year....and I just moved here in________(name that month)"
Closing on a new home is a very exciting event...butterflies, damp palms...eager anticipation of the rooms you will paint, the hardwood floors you will uncover....the buyer's mind is off in a thousand places...planting the flowers, harvesting vegetables, choosing the place for the television....and the drone of the closing agent, real estate agent or attorney who is explaining the closing statement is buzzing in the background while the long awaited event has the distractions of the plans for the future. Buyers nod in agreement most of the time when asked if they understand this line, that addition, this subtraction...again with the realistic mind filling thoughts of the dream house becoming reality. Here is the reality that the numbers tell you....someone has explained....and often get lost in the excitement of the occasion:
Mr/Ms/Mrs New Homeowner.....
You pay taxes on your new home from the day you close thru the end of the year.
That sounds simple enough....and logical....you are paying for the time you actually own the house.
The tax bill represents property taxes for the entire year January 1 - December 31
The taxing authority sends the tax bill to the person who owns the property at the address of the property. If each tax
bill were pro-rated at the end of the year...part of it for the seller and part for the buyer, this would place a tremendous
burden on the government...allow for a huge increase in errors....and to alleviate all of that, the title company does
the math for you and it appears on the closing statement.
The taxes that represent the time earlier in the year, when the house was owned by the seller appear as a credit on the
closing statement.
Here is the part where the new homeowner has nodded politely, but forgets promptly when they are handed the keys to their new home. Let's imagine, that the closing took place June 1st and for the sake of simplicity, the property taxes are $1/day. (Don't we wish !) January 1 - May 31st is a total of 151 days or $151 in taxes that is owed by the sellers who owned the property during that time.
When the new homeowner gets the tax billl, the bill is for the entire $365 even though they have only owned the house for 214 days of the year.(365- 151 - 214).
No one expects the new homeowner to go find the seller who may have left the area...maybe it is an estate...perhaps it was a divorce...playing detective could become quite complicated.
Instead....on your closing statement ...the taxes are prorated and the new owner is given a credit of the $151 against the sale price of the home. This means, new homeowner, that you were paid the portion of the taxes that the seller owed in the form of a credit....and you will then be paying the entire tax bill to the taxing authority.
' Hope this takes some of the confusion out of the taxing question for new home owners. You are welcome to call Sally & David Hanson for all your real estate questions in southeastern Wisconsin...we're happy to help! May your problems be less taxing...your life fulfilling and enjoy your new home !
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