Wake County real estate taxes at time of sale? (sales, 2013)

[lb27608]

I have a question that I hope the real estate agents on the board can clear up for me. Mike? Vicki? Anyone?

I'm selling an investment property in Wake County, and the HUD-1 showed a deduction from my proceeds for unpaid real estate taxes between January 1st and today (the date of sale). The paralegal at the closing attorney's office told me that's because real estate tax bills are based on a calendar year.

The Wake County Revenue Department says that's not true. Here's what their website says:

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 2011 would cover the period of July 1, 2011, through June 30, 2012.)

That implies that the tax bill I paid at the end of last year covered July 1, 2012 to June 30, 2013. Based on that information, I was expecting to see a credit on the HUD for the pro-rated amount between May 15th and June 30th. Instead, it seems like I'm paying TWICE for the period between January 1st and today.

Is pro-rating the tax bill at the time of sale done using a calendar year just for the purpose of convenience?

[MikeJaquish]

As the NC Real Estate Manual from the NC Real Estate Commission states, "the overwhelming customand practice in closing residential real estate sales transactions in North Carolina is to prorate ad valorem real property taxes on a calendar year basis."

I do not know the "why," only that it is done that way routinely.
If you want to negotiate differently, and find a willing party on the other side of the transaction, I think there is no law saying you cannot proceed as you say.

Good questions for a closing attorney, but I think convenience is the common factor.

[lb27608]

Thanks, Mike! That makes sense to me.

[lb27608]

Just a quick follow-up: both I and the closing attorney spoke with a manager at the Wake County Revenue Department. He referred us to N.C.G.S. 39-60, which requires property taxes to be pro-rated on a calendar year basis unless the sales contract specifies otherwise. That provision was added to the law in 2006 to clear up confusion on this issue, he said.

Had I been aware of this issue and stipulated in the contract that taxes would be pro-rated on a fiscal year basis, I would be getting a $200 credit instead of a $590 charge. If you're selling a property, you may want to keep this in mind!

[jshallen]

Look back at the HUD when you bought the home and you more than likely paid on a prorated calender year...

RE Agents pay dues from mid year to mid year as well

[MikeJaquish]

Originally Posted by jshallen

Look back at the HUD when you bought the home and you more than likely paid on a prorated calender year...
...

Right.

Originally Posted by lb27608

Just a quick follow-up: both I and the closing attorney spoke with a manager at the Wake County Revenue Department. He referred us to N.C.G.S. 39-60, which requires property taxes to be pro-rated on a calendar year basis unless the sales contract specifies otherwise. That provision was added to the law in 2006 to clear up confusion on this issue, he said.

Had I been aware of this issue and stipulated in the contract that taxes would be pro-rated on a fiscal year basis, I would be getting a $200 credit instead of a $590 charge. If you're selling a property, you may want to keep this in mind!

Remember, it takes two to tango in a contract, and the other party would have had to agree with a $790 reversal.

[lb27608]

Originally Posted by jshallen

Look back at the HUD when you bought the home and you more than likely paid on a prorated calender year...

Way too far back to be an option - that HUD is long gone after a couple of refinances over the past couple of decades. It's possible that I did, but I can't confirm. The tax value on the property was quite a bit lower back then, though, so even if I had, I'd almost certainly come out on the losing end with this transaction.

Regardless, it doesn't change the fact that it's just fundamentally illogical to do it that way given how Wake County collects taxes. If the General Assembly had thought about it for two seconds, they could have worded the law to say that pro-rating would be done in accordance with the tax year in the county of sale. Simple.

Remember, it takes two to tango in a contract, and the other party would have had to agree with a $790 reversal.

In my case, the buyers (first timers) agreed that it was pretty senseless, but neither of us want to delay the sale any longer. I realize that other sellers might not be so lucky!

Anyway, thanks for all the contributions. We were able to bring the transaction to a close, and everything is good.

[Okumuras]

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.)

[luv4horses]

I have been told that the taxes are paid in arrears. That makes things even more difficult to estimate. For example if I sold my property today (July 13, 2018), what period would I be responsible for paying?

[MikeJaquish]

Originally Posted by luv4horses

i have been told that the taxes are paid in arrears. That makes things even more difficult to estimate. For example if i sold my property today (july 13, 2018), what period would i be responsible for paying?

1/1/2018--7/13/2018