Question:
We recently wrote an offer with our REALTOR®, Steve, and it was accepted. We are very excited as this is our first home, and we felt very comfortable dealing with Steve. Steve was telling us about closing costs and although he did a great job on this I am still confused on the property tax costs. We understand that we have to pay our share but we would like to have an idea what that amount will be so we can have funds allocated when we see the lawyer. Please could you explain how the share in property tax is determined?

R & T Jones

Answer:
Dear R & T

Thank you for your excellent question. This is an area that buyers sometime get confused with in a real estate transaction. The rule is the seller is responsible for their share of the property taxes from the beginning of the tax year until the day of possession and the buyer is responsible from the possession date until the end of the tax year.

An example of this would be Seller Smith has sold their home and the date of possession by Buyer Brown is Aug 01, 2006

So:

January	31 days
February	28 days
March	31 days
April	30 days
May	31 days
June	30 days
July	31 days
TOTAL	212 days that Smith has lived in property

The property taxes for this property are $3145.68
Smith’s share of the property taxes would be calculated this way:

212days/365days x 3145.63 = $1827.08 Browns share would be:

August	31 days
September	30 days
October	31 days
November	30 days
December	31 days
TOTAL	153 days Brown will live on property in tax year

Brown’s share would be 153days/365days x $3145.68 = $1318.60

In the event seller Smith has paid the taxes for the full year then buyer Brown will owe smith the $1318.60

In the event Smith is paying the property taxes through the TIPP program where 1/12 of the payment is paid every month the buyer can assume this payment program which will result in a smaller closing amount that Brown will have to pay as the 1/12 amount of the taxes are required to be paid for August, but they will be required to make the other monthly payments for the remainder of the year as they come due.

I hope this clears up your question regarding your share of the property taxes. It is always the wise buyer that seeks advice from their REALTOR® or their lawyer regarding the closing costs on a property purchased.

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