There are a lot of moving pieces during a real estate closing and funds that need to change hands between the buyer and seller. Most transactions involve money that is required to change hands in person as well as escrow accounts that have been established along the way. All of these numbers and figures are reconciled at the day of closing. If it cannot, the closing does not take place. As a result, all parties involved in the real estate transaction are motivated to ensure that the closing takes place on time.
One of the primary line items to be reconciled at the time of closing between the buyer and sellers is the matter of property taxes and when that burden shifts from the seller to the buyer.
When Does the Burden of Property Taxes Change Hand?
The seller is typically responsible for paying taxes up to the day when the property transfers to the buyer. A prorated amount is then formulated based on what taxes are paid (or due to be paid) and is baked into the closing documents prepared for and managed by the title company.
The calculations can vary wildly based on what month the closing takes place. Buyers may need to be prepared to come to the closing table with several thousand dollars just to reconcile the cost of the taxes owed.
It’s not uncommon to see the burden of property tax payments used as a point of negotiation. If buyers are aggressive in their pursuit of a property, they may offer to pay taxes up front on the property to incentivize the sale. Similarly, if a seller is looking to speed up or progress a sale, they may incentivize the buyers by opting to pay additional taxes. Again, the management and reconciliation of all these numbers and stipulations are tracked and managed by the title company and settled at closing.
Principle Abstract and Settlement Services has years of experience preparing and managing closings for both residential and commercial real estate transactions. As an independent provider, we work to ensure an accurate and seamless experience for all parties. If you have a real estate transaction in mind, give our office a call and a member of our team will be happy to assist you.