Property taxes add cost to every home buyer’s monthly payments, but they also serve to provide valuable improvements and services in the surrounding community.
• City and county taxes provide for civil services like police and fire departments, as well as community improvements and schools.
• Property taxes may cover different time periods depending on location. An adjustment between buyer and seller is usually needed at closing.
• Many buyers choose to pay into an escrow account with their lender, who will pay their taxes for them as they come due.
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Asheila: You have city taxes, you have county taxes, and these are things that pay for improvements in your community, as well as the civil services. Your police department, your fire department. Um, the school district.
James: It’s important when you’re buying a house or selling a house to understand how the property taxes are dealt with within the contract. All the taxes are done in arrears. So, when you pay your tax bill, it’s for a period of time in the past. So, if you were to buy a new home, you wanna get a proration, you wanna get compensation for that at the closing. So that you’re fairly compensated when the bill comes, in the future.
Asheila: At closing the seller is gonna be responsible for taxes, up until the date that you close on the loan. From that point forward, it’s the buyers’ responsibility.
Ja: So you have two options as a home owner. You can choose to pay your taxes on your own. Uh, which means that essentially, you are responsible for paying the bills as they come due. A simpler option that most consumers will opt for is to have the lender go ahead and take care of that for you. –‘s will divide your total tax bill, into twelve installments.
James: So it goes into the escrow account, which-is-like-a- for savings account, so when the taxes come due, the home owner doesn’t have to come up with additional money, it’s already there.
Ja: A lot of clients may shy away from an escrow account, cause they feel like they’re giving money to somebody else for them to collect interest on. But reality is, is that, this is not an interest bearing account for the lender. It is solely for the benefit of the home owner.