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My purchase contract for a new house that has not started building yet says:
A. PRORATIONS. Taxes for the current year, maintenance fees, assessments, dues and rents will be prorated through the Closing Date. The tax proration shall be calculated taking into consideration any change in exemptions that will affect the current year’s taxes. If the amount of ad valorem taxes for the year in which the sale occurs is not available on the Closing Date, taxes will be prorated on the basis of taxes assessed for the previous year or on a good faith estimate by the Title Company. The parties agree that the tax proration at Closing will be final and not subject to adjustment. If taxes are not paid at or prior to Closing, Buyer will be obligated to pay taxes for the current year.
The part that I underlined sounds strange to me. I looked at generic copies on Texas purchase agreements and they usually say something like "If taxes for the current year vary from the amount prorated at closing, the parties shall adjust the prorations when tax statements for the current year are available."
Should I have my lawyer change the 'final and not subject to adjustment' part or is this normal? (Because it says if the amount of tax is not available, which it probably won't be because it's a new house, won't basing it on last year's tax on empty land be a really low estimate?) What is the good faith estimate based on and is it usually accurate?
...Should I have my lawyer change the 'final and not subject to adjustment' part or is this normal? (Because it says if the amount of tax is not available, which it probably won't be because it's a new house, won't basing it on last year's tax on empty land be a really low estimate?) What is the good faith estimate based on and is it usually accurate?
Thanks!!!
Shouldn't your lawyer answer address these questions for you?
I can't speak for TX but in my experience this is pretty normal. New construction contracts are always written with more favorable terms for the builder. In a resale contract, the language is more typically along the lines of the generic language you found.
...Texas purchase agreements and they usually say something like "If taxes for the current year vary from the amount prorated at closing, the parties shall adjust the prorations when tax statements for the current year are available....
Just curious, how do you get the parties to adjust after closing?
In AZ, our standard contract just says prorated at close of escrow based on latest tax information available. Essentially what the OP's contract says.
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