First Year/Closing Property Taxes on Home Purchase in Dallas (Converse: sales, real estate)

[Sunbather]

Since I am under contract to close on a home here and this is my first time owning a home in Texas, I am trying to understand what cash I need to be bringing to closing for the property taxes. Yes my mortgage lender will be providing the normal disclosure paperwork this week and the estimates will be there, but I am just trying to understand it myself as well.

From what I understand here, taxes for the previous year are due by January 31st. So the current owners would have paid 2018 taxes already by January 31st of this year. 2019 property taxes won't be due until January of next year. However, since I am planning to escrow taxes, the mortgage company at closing would want taxes for the first part of this year from closing up to June (since my first mortgage payment should be in June I believe, with an April closing?) and then from June onward it would be the normal monthly portion as part of the mortgage, going toward escrow. Correct?

My second question has a few parts and is related to that is what tax value I will be paying on for 2019. Since the current owners were in the house on January 1st and have had the homestead exemption already filed, I believe that the taxes in 2019 will still have the homestead exemption applied for this house, correct? (and then next year I will have to file our homestead exemption paperwork in our name by April since we will be new owners and will occupy the home in January 1st, 2020).

And the follow up to that: Will be the 2019 tax value based on the current valuation? (and 2020 catches up to the 2019 sales price?) Or will 2019's taxes already be based on the sale this year since this year's bill won't be out until the end of this year?

Thank you in advance for any insight.

[WorldKlas]

You can look up the property on Dallas Central Appraisal District and get the estimated taxes due for 2019 and then you can calculate the present owners’ contribution needed towards your 2019 taxes. However, usually the Title company will use the prior year’s taxes for making the calculation because the 2019 taxes due won’t be determined until November.

Yes, your taxes for 2019 will be the homesteaded value if the property was homesteaded by the end of January. And 2019 taxes will propbaby be based on the selling price of the house in April.

[TeamLynn]

You can ask your title company and/or realtor to prepare a sample closing statement for you tha will include your proration of the 2019 taxes. Typically the lenders will want to put 3 months in escrow, plus the money collected from the seller for the time they were in the house. If the 2019 appraisal values are not in yet, they will base it on the 2018 taxes or the best and most reliable information they (the tile company) has.

[CMC_TX]

Originally Posted by Sunbather

Since I am under contract to close on a home here and this is my first time owning a home in Texas, I am trying to understand what cash I need to be bringing to closing for the property taxes. Yes my mortgage lender will be providing the normal disclosure paperwork this week and the estimates will be there, but I am just trying to understand it myself as well.

From what I understand here, taxes for the previous year are due by January 31st. So the current owners would have paid 2018 taxes already by January 31st of this year. 2019 property taxes won't be due until January of next year. However, since I am planning to escrow taxes, the mortgage company at closing would want taxes for the first part of this year from closing up to June (since my first mortgage payment should be in June I believe, with an April closing?) and then from June onward it would be the normal monthly portion as part of the mortgage, going toward escrow. Correct?

My second question has a few parts and is related to that is what tax value I will be paying on for 2019. Since the current owners were in the house on January 1st and have had the homestead exemption already filed, I believe that the taxes in 2019 will still have the homestead exemption applied for this house, correct? (and then next year I will have to file our homestead exemption paperwork in our name by April since we will be new owners and will occupy the home in January 1st, 2020).

And the follow up to that: Will be the 2019 tax value based on the current valuation? (and 2020 catches up to the 2019 sales price?) Or will 2019's taxes already be based on the sale this year since this year's bill won't be out until the end of this year?

Thank you in advance for any insight.

Correct - you are no responsible for 2018 taxes as you did not occupy the home. That would be settled with the 2018 owner prior to closing.

With an April close, your mortgage company will typically require 2 months reserves in the escrow account for property taxes & insurance. The best way to look at it is anything you pay from date of closing forward toward the escrow for taxes will go toward your 2019 tax bill. Depending on when you close in April, you will see your first mortgage payment due in May or possibly early June.

The 2019 taxes will be based on the 2019 assessments by the appraisal district. You'll be able to submit your Homestead at the end of this year for 2020.

The appraisal district will look at your purchase price and potentially raise your taxable value in 2020 if the purchase price was significantly above the current taxable value.

The mortgage company will do a good job ensuring the proper amount is in your escrow to cover the taxes. If there's a change, they will notify you of the shortfall and why your payment might be increasing, but it's typically not by a lot.

Conversely, if you have paid too much, you have the right to request an escrow analysis, which will prompt a review of the current taxes. If you'd paid too much, they can adjust your payment downward.

You do not get refunds on a surplus in the escrow during the loan term, only a potential reduction in monthly payment. Usually there's not a big surplus, but if there is, you wouldn't get that until you sold the property or refinanced.

[cordata]

In simple terms can someone describe who is responsible for the fraction of taxes prior to closing in this scenario ? Is the seller required by law to put up (in this case) 25% of the estimated taxes for 2019 ? Or is this somehow worked into the sales contract that the seller puts up this money ? Is it a negotiable item (seller pays pro-rata property taxes) ?

[derekv]

It is a negotiable item, but typically the seller contributes pro-rata taxes. The typical TREC form includes a pro-ration of taxes.

Originally Posted by cordata

In simple terms can someone describe who is responsible for the fraction of taxes prior to closing in this scenario ? Is the seller required by law to put up (in this case) 25% of the estimated taxes for 2019 ? Or is this somehow worked into the sales contract that the seller puts up this money ? Is it a negotiable item (seller pays pro-rata property taxes) ?

[Katana49]

In every real estate transaction I've had, the seller pays property taxes on the property up to the closing date, and the buyer will pay for the remainder for the year.

[Rakin]

Originally Posted by Katana49

In every real estate transaction I've had, the seller pays property taxes on the property up to the closing date, and the buyer will pay for the remainder for the year.

That money is given to the Buyer in the form of a Credit then the Buyers lender will pay the Tax bill at the end of the year.

OP's lender should be able to give them a very good estimate on their closing costs with an explanation how those figures are arrived. Specifically his escrow account.

He must have a crappy or no agent. This is what an agent would also answer.

[Katana49]

Originally Posted by Rakin

That money is given to the Buyer in the form of a Credit then the Buyers lender will pay the Tax bill at the end of the year.

Correct.