are back taxes the responsibility of the buyer? (mortgage companies, insurance, percent)

[jfn111]

This is not uncommon and is part of the negotiations. A broke seller wants you to pay the taxes and you adjust your offer to reflect this expense. If you're financing the purchase the bank will insist these are paid at closing so you need the cash to take care of this.

[freemkt]

Seems to me the buyer should simply make an offer for proper value NET of the unpaid taxes.

e.g. a buyer should offer $90,000 for a house worth $100,000 with $10,000 of back taxes owed. The math is simple and the buyer pays $100K ($90K cash + the $10K taxes) for a home worth $100K, while the seller absorbs the cost of the taxes he didn't pay timely.

[jackmichigan]

Originally Posted by foundapeanut

Not sure title insurance will pay back taxes? Never heard of this. Why do people lose there homes for non payment of taxes if this is the case?

If you are in a title insurance state you have to buy it.

You apparently misread what I wrote. IF title insurance is to be obtained as part of the purchase, a title company will require that the back taxes be paid off at closing. Of course, if you get title insurance on a property and later fail to pay the taxes, the title insurance company isn't going to pay the taxes.

What state requires title insurance?

[Hemlock140]

Originally Posted by Avalon08

So I assume this is in cases where the seller is underwater? Because otherwise the taxes are just paid out of the sale proceeds that go to the seller. I don't get why she'd frame it as "your responsibility"...it's not.

Yes, without any proceeds, on an underwater home the buyer has to pay the taxes. Property tax goes with the property, not the person owning it. They don't need to worry about collections because they simply place a lien on the property, and will take and auction it to get the money, regardless of who owns it at that time. Normally you would just reduce your offer by the amount due in taxes. I would be careful about getting a thorough inspection. If the seller didn't pay their taxes, they probably didn't do a lot of maintenance either.

[jackmichigan]

Originally Posted by Avalon08

So I assume this is in cases where the seller is underwater? Because otherwise the taxes are just paid out of the sale proceeds that go to the seller. I don't get why she'd frame it as "your responsibility"...it's not.

Not necessarily. I know of cases where a Seller simply gave a Quit Claim Deed and had the purchaser pay off the back taxes. They weren't underwater because they had no mortgage.

[MrRational]

Originally Posted by jackmichigan

You apparently misread what I wrote.

Or misread what I wrote about liens or other unknown at time of settlement.

[Lacerta]

I'm confused by those people who said this is common. In my area, this is almost unheard of. The only time I've ever seen this is on a short sale where the bank wouldn't agree to the short unless the buyer paid off the back taxes. Maybe 2 or 3 transactions in 15 years as an office manager at a real estate office (so I see everyone's deals in the whole office). Even on short sales, the bank just figures back taxes into their net and usually will pay them if the net works. I did see one once where the buyer had to pay off the seller's credit card debt to close on the house, because that debt had somehow been attached as liens on the house.

So there is nothing inherently wrong about this. It can be part of the negotiation and if agreed to, is perfectly legal. But it is in no way common or expected.

[animalcrazy]

Originally Posted by jackmichigan

Yes, that would be the normal way it would be handled. However, it could be that the Seller wants to convey title prior to the back taxes being paid off. That can be done, but I would strongly advise against it to the OP. Under those circumstances, the Seller wouldn't be issuing a Warranty Deed, merely a Quit Claim Deed, leaving the taxes to be paid by the purchaser after the closing.

Of course, that type of scenario would most likely be a cash sale without benefit of title insurance. If title insurance were involved, the title company would invariably require that the taxes be paid at closing.

You can also get stuck paying for back taxes if your attorney screws up and doesn't add a provision for the seller to pay the back taxes. We got stuck paying for almost half a year of taxes that belonged to the seller when we bought our house.

Would I buy a house that included paying the back taxes? Only if the price was right and I was positive that there wasn't an IRS lien against the property that was worth more then the equity. Everything is negotiable if the price is right, but I'd prefer not being partners with the IRS. They have a way of coming out on top.

[jghorton]

If the seller is already underwater on his mortgage, plus behind on his taxes, the likelihood is he not only has no equity in the property, but may have other undisclosed liens against the property. Be careful about agreeing to pay back taxes that you know exactly what those are ... and that you are not also agreeing to absorb liens and other expenses (closing, etc) - based on a few seemingly innocuous words slipped into the contract.

Unless you are getting a really great deal on the property, this one sounds like it has the potential for significant problems and expenses. If you are getting a really great deal, it probably means someone (ie; the bank) is not getting a great deal ... and will be looking to make themselves 'whole' at the expense of whomever has the money in the transaction.

[jackmichigan]

Originally Posted by MrRational

Or misread what I wrote about liens or other unknown at time of settlement.

I'm not sure if you were addressing me but, if you were, I didn't misread what you had written about other liens, either known or unknown. I simply didn't address that part of your post.