Escrow Thursday: What About Property Taxes?

What About Property Taxes?

The terms of your Purchase and Sales Agreement, and the escrow instructions that result from that agreement, determine how the property taxes are to be paid and by whom. Usually the property taxes are prorated for each party to the agreement. Any unpaid property tax at the time of the purchase is split between the buyer and seller. The seller’s part is determined by the number of days they have been in possession of the property after the last tax payment. The buyer’s part is determined by the number of days that they will be in possession of the property before the next payment is due.

This proration of taxes is usually in the escrow instructions. You will want to check the settlement statement to be sure that this is done properly. Sometimes it is negotiated in the purchase and sale agreement that either the seller or the buyer will pay all of the unpaid property tax that is due for that tax year. Make sure that you check the P&S Agreement carefully before the final signing so that you are not paying more than your share of the taxes due, unless that is what you want.

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