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You are only responsible for paying taxes for the time you lived there. If you are closing July 13th, the attorney would collect taxes from January 1, 2018 to July 13, 2018.
Although you are paying these taxes, at closing...if you have an escrow account, those funds will be returned to you so make sure the attorney puts your correct address on all paperwork.
Also in your escrow will be your homeowner's insurance so the unused portion of that will be returned to you, as well.
I believe the lender of the house you are selling has 30 days to send these funds to you.
From calendar year proration you would pay taxes from January 1 to July 13 even though your taxes would be fully paid up to June 30 of next year if you had already paid the July 1st tax bill.
You get the tax bill in July to prepay taxes to June 30 of the next year, the arrears period is only for the period July 1 until your payment is recorded. I just sold a place on May 21, 2018 that had taxes prepaid to June 30, 2018 and yet was charged taxes for the January 1, 2018 to May 21, 2018. I should have been reimbursed for the taxes that were prepaid from May 22 to June 30. I filled out a small claims court complaint to recover the prorated taxes that was already prepaid from the settlement attorney but my agent offered to reimburse me so I did not send it in. The proration on Calendar year is really illegal since you have already paid the taxes to June 30. What does proration on Calendar year really mean? If I sold a property on December 15 I would have prepaid taxes to June 30 of the following year, yet they would debit me for taxes again for the January 1 to December 15 period? Just does not make sense and don't think it would hold up in court if challenged.
Here is a quote from the North Carolina Realtor Association issued Seller Advisory, see last sentence: http://www.wsrar.com/wp-content/uplo...erAdvisory.pdf
Property Taxes
In North Carolina, when property is bought and sold, the real property taxes are prorated between the buyer and the seller according to the terms of the standard Offer to Purchase and Contract (jointly-approved by the NC Association of REALTORS and the NC Bar Association). The seller pays the taxes from January of the current year through the settlement date and the buyer pays the taxes from the settlement date through the end of the year.
Cities and counties in North Carolina operate on a fiscal year that begins on June 1st of each year, so tax rates are established and bills are released by the tax office in the middle of the year. If, at the time of settlement, tax rates and bills haven’t been established/released, taxes are typically prorated based on the prior year’s taxes, and the buyer is given a credit for the seller’s portion of the taxes. In this case, the buyer is responsible for paying the taxes on the property for the entire year once the tax bill is released. If the tax rates and bills have been released by the tax office and have not yet been paid by the seller, taxes are prorated and paid at settlement. If the seller has already paid the taxes, taxes are prorated and the seller is given a credit for the buyer’s portion of the taxes.
Here is a quote from the North Carolina Realtor Association issued Seller Advisory, see last sentence: http://www.wsrar.com/wp-content/uplo...erAdvisory.pdf
Property Taxes
In North Carolina, when property is bought and sold, the real property taxes are prorated between the buyer and the seller according to the terms of the standard Offer to Purchase and Contract (jointly-approved by the NC Association of REALTORS and the NC Bar Association). The seller pays the taxes from January of the current year through the settlement date and the buyer pays the taxes from the settlement date through the end of the year.
Cities and counties in North Carolina operate on a fiscal year that begins on June 1st of each year, so tax rates are established and bills are released by the tax office in the middle of the year. If, at the time of settlement, tax rates and bills haven’t been established/released, taxes are typically prorated based on the prior year’s taxes, and the buyer is given a credit for the seller’s portion of the taxes. In this case, the buyer is responsible for paying the taxes on the property for the entire year once the tax bill is released. If the tax rates and bills have been released by the tax office and have not yet been paid by the seller, taxes are prorated and paid at settlement. If the seller has already paid the taxes, taxes are prorated and the seller is given a credit for the buyer’s portion of the taxes.
They operate on a July 1 - June 30 fiscal year. Was the entire post quoted from NCAR (though I also see the advisory is 4 years old)?
The Statute and the contract generally meet - at least they are consistent. If they were to change it, it could make a meaningful difference for every transaction that year. Seller would get an additional benefit from when they bought - regardless of whether it was 3 or 30 years ago.
By the way, I see that we got a nice bump of 5% in Raleigh this year.
Just quoted the relevant part, you can see the entire advisory at the link.
Don't know how or why Calendar Year was used in the Statute, probably misunderstood by legislature.
Contract probably just followed the statute and mis-used in application and never challenged in a higher court of law.
Even using calendar year why not credit the seller for taxes paid from date of sale to the end of year since it has already been prepaid by the seller.
Just logically and legally if seller has prepaid taxes he should not be charged again for taxes he has already paid, he is suffering a double penalty since he should be credited for taxes already paid for the period that the buyer is responsibility for taxes.
Here is quote from Wake Dept of Revenue Real Estate
Annual tax bills are calculated for the fiscal taxing period of July 1 through June 30. They are not
based on a calendar year. (Example: A bill issued in July 2018 would cover the period of July 1,
2018, through June 30, 2019.) Property taxes not paid in full by January 5 following billing are
assessed an interest charge of 2% for the month of January and an additional 3/4 of 1% each
month thereafter.
Here is the Wake County real estate contract wording which should be changed to Fiscal Year.
(a) Taxes on Real Property: Ad valorem taxes and recurring governmental service fees levied with such taxes on real property shall be prorated on a calendar year basis;
Here is the NC General Statute:
Chapter 39: Conveyances.
Article 10. Real Property Tax Proration. § 39-60. Property tax proration on sale of real property. Unless otherwise provided by contract, property taxes on the real property being sold shall be prorated between the seller and buyer of the real property on a calendar-year basis. (2006-106, s. 7.)
Upon further reflection and consideration, sounds like the NCAR should strongly consider taking this under consideration. I'd be a little surprised if they haven't at some point in the past. That is wrong that (for example) you pay your property taxes Jan 1, close Feb 28, and they ask you to pay 2 more months of taxes. You should be gettting 4 months back from the Buyer.
I agree totally that the seller is getting axed on this one. Taxes are calculated for the year July 1 2017 to June 30 2018 and the tax bill is sent out July 20th. You pay that bill whenever you want between Sept 1 2017 and Jan 7 2018, at which point you have paid the tax for Jul 2017 thru June 2018.
Then you sell your house on July 30, 2018. Suddenly you owe taxes back to Jan1? Seems to me you already paid them, or at least 6 mo. worth. But no, the real estate industry says you need to give that same payment again to the buyer. In fact, you had it in the boilerplate contract among all the other gobbledygook, and no one brought it to your attention. Too bad, so sad.
Most sellers seldom sell homes and are inexperienced, it is the job of the seller's agent and settlement attorney to make sure debits, credits, and prorations are performed accurately and IAW accounting standards.
Smart sellers negotiate with focus on their Net Proceeds, and don't worry about line items and earmarking them.
When getting the HUD fees are added after the fact, they are a line item that is "just paid".
As a seller what would be the most advantageous time to sell your home with this arcane issue? How about about least advantageous?
I'm having trouble following completely.
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