Closings are all about making sure every document has been signed and all the bills are paid. One of the most important things to determine is how much of the property taxes the buyer owes versus how much the seller has paid. Because, when someone sells their home, they may have recently paid their property tax that was due the month of the closing. To help repay the seller, many sales contracts require the buyer to prorate a certain amount of the property taxes that have already been paid. It will take a few steps to get the calculations right for the amount owed by the property buyer but it isn’t too complex.
In order to find out how much of the property taxes needs to be paid by the buyer you have to:
- Find out how much the real estate taxes are for the property in the current year. This is something that the seller will often have a copy of that they can share with you.
- Not counting the sale day, figure out how many days the seller owned the property for the current year.
- Divide the amount of days you just calculated by 365, the number of days in a calendar year, to tally up the percentage of the tax year that the seller owned the home.
- Multiply this percentage by the total on the property tax bill. The result should be the amount the seller has already paid. If the seller has not already paid this amount then they owe the buyer the difference between what is required and what has been paid.
- Subtract the amount that the seller has already paid from the total property tax and the difference is the prorated amount that the buyer now owes at closing.
If you have any questions regarding prorating, contact one of our attorneys at Slepian, Schwartz & Landgaard at 770.486.1220. They will be more then happy to go into greater detail about the specifics with you and to answer any other questions or concerns that you might have.
