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I Just Got the Tax Bill .....For the WHOLE YEAR.....

By
Real Estate Agent with EXP Realty 414-525-0563 57026-90 Broker

phone ringing      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.
tax bill

                          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. 
 
minus sign      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.

welcome home
    ' 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 !

Posted by

Sally K. & David L. Hanson, ABR, CDPE, CSS, e-Pro,ILHM, REDS


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TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029

Good morning S&D. Good post for those who don't understand how taxes work on new sales... 

Jan 02, 2011 12:12 AM
Barbara Todaro
RE/MAX Executive Realty - Happily Retired - Franklin, MA
Previously Affiliated with The Todaro Team

Sally....this is a common occurrence.....the new buyer wasn't listening because of the excitement or has forgotten that it WAS explained at the closing table the there was credit from the seller to the buyer to the day of closing for taxes and the tax bill will go to the new buyer....but the seller has already paid his share....it's the only reasonable way to do this without additional expense to the town.

Jan 02, 2011 12:15 AM
Randy Ostrander
Lake and Lodge Realty LLC - Big Rapids, MI
Real Estate Broker, Serving Big Rapids and West Central MI

Nice explanation of how taxes work Bill and Sally. Buyers sometimes are overwhelmed by closings and miss that part. Surprises are not always welcome when it comes to the tax man.

Jan 02, 2011 12:22 AM
Laura Forman
RE/MAX AEROSPACE REALTY www.LauraSellsBrevard.com - Melbourne, FL
Your Brevard Premier Property Specialist

Excellent explanation and well illustrated.

Jan 02, 2011 12:25 AM
Laura S. Baker
First Weber Inc - Lake Mills, WI
Realtor (920) 728-4118, First Weber Inc

Great explination, but as you know every new home owner is only going to hear; "Wha wa wa wa,...wa",  until they get that cold wake up slap in the face from the tax man!  I remember that exact experience with my first home purchase. 

Jan 02, 2011 12:28 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

Few buyers or sellers understand the escrow closing statement and the part where the taxes are DEBITED and CREDITED.

Jan 02, 2011 12:31 AM
Barb Szabo, CRS
RE/MAX Above & Beyond - Cleveland, OH
E-pro Realtor, Cleveland Ohio Homes

Most buyers here pay their taxes with their mortgage. In fact, there are very few lenders that will allow a buyer to pay taxes on their own. Maybe that's a good thing. I have explained this many times myself, but Iwill spend extra time if the buyers tell me they would like to pay taxes on their own.

Jan 02, 2011 12:32 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

   From the hear what you want to hear school....thought it would help the folks who need a little explanation !

Jan 02, 2011 12:33 AM
Margaret Rome Baltimore 410-530-2400
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

Sally, You did an outstanding job explaining the payment of the property taxes. It is so important for us to have the settlement sheet so we can make sure the home owner understands.

Margaret

Jan 02, 2011 01:56 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Sally and David, hope you had a nice near year and have a successful 2011!  Great explanation of the tax bill situation...haven't gotten any calls yet, but it does happen!

Jan 02, 2011 02:36 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

Thanks Margaret...even if it is understood at closing...it can be months before the tax bill comes !

  Hey Kristin...let us know when you want to toast the New Year...we are always up for that !

Jan 02, 2011 02:47 AM
Dick and Dixie Sells
Sells Real Estate, LLC - Trinity, FL
Realtors, Tampa Bay Florida Homes For Sale

Hi Sally and Dave, and a Happy New Year to you and the cats! The  tax thing is the same here!

Jan 02, 2011 07:14 AM
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

While Im at closing with the buyer and the Realtor, I always make sure to clarify that the funds from the seller are being paid for the their portion of the taxes which will be due at the end of the year. In the situation where the buyer does not set up an escrow account, the sellers funds are used towards the down payment. Especially in the second situation, I advise the sbuyer to still place the same amount of funds into a savings account in preparation for taxes. Not all Escrow Companies do that, so I think its important to be at the closing so that I can clarify and do not get that call at the end of the year.

Very nice post and reminder to your buyers.

Jan 04, 2011 04:58 PM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

Thanks John...it is the excitement of the moment....and the time lag between closing and tax bills that  make the memory weak ....best to you in 2011!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Jan 05, 2011 12:14 AM