Posted by SCook85 on December 06, 1998 at 18:15:00:
In Maryland there is a rule that Buyer and Seller automatically split recording fees unless otherwise stated. I don’t know what the laws in your state are but I would imagine that if the seller is supposed to pay all closing costs that they should pay them. As far as taxes go. In Maryland taxes have to be paid up to July (1999). The seller should have already paid there taxes for an entire year and now you have to reimburse them for the unused portion. You probably can’t get out of that one. Hope this helps.
Have purchase agreement stating seller to pay all closing costs. Just received closing packet charging me for July taxes and recording fees.
Questions:
If seller agreed to pay all closing costs, am I responsible for recording fees?
If I’m paying cash for this deal, do I have to pay taxes in advance? (It looks like they’re trying to make me pay for the sellers 1998 taxes?) I know I got a good deal on this house but I’m not paying his taxes.
My realtor said I was paying July taxes in advance which doesn’t make sense to me. Any help would be appreciated.
I guess in Michigan taxes are paid in advance. (I learn something new everyday). I’ll be off the site for a few weeks to do some cleaning and fix-up. Hope I don’t miss too much.
I’m With Irwin and SCook85 - Posted by Ed Wachsman
Posted by Ed Wachsman on December 07, 1998 at 05:17:10:
The bottom line is that real estate taxes are not considered a cost of closing. They are dollars from a third party transaction that have to be dealt with and the best and most convenient time to deal with them happens to be at closing.
In various parts of the country, differing customs have evolved that distribute the payment of the various fees and charges related to the actual property transfer. What has been universal in my experience (transactions in OH, CT, IL, Maryland, NV, NJ, and some other states) is that the real estate taxes are dealt with not on an arbitrary agreement or custom that seems fair within the particular community but rather it is based on the premise that whoever owns the property at a particular point in time should be the person responsible to pay the tax. What complicates matters is that the laws vary. In some counties they are paid in advance, in others the are paid in arrears. The law requires and dictates when they be paid. In Ohio we pay taxes in arrears. In your state it sounds like they are paid in advance. In our state seller’s typically give a credit and pay the buyer money to pay the taxes that accrued on the seller’s “watch” since the bill will not come out until sometimes months after the closing. If I understand your post correctly, in your circumstance they have paid for taxes in advance for a period of time during which they will not be the owner of the property. The correct thing to do is to reimburse them as you will have the person buying from you reimburse you.
Think of the accounting that has to be done at closing to handle rents which are also not a closing cost. If you buy a property on the 15th of the month the seller gets to keep half the rent and credits you with half the rent. In the case of rents and real estate taxes you are adjusting third party financial matters on the ledger sheet for income and expenses that are received or paid for in advance and have to be reconciled for the period that you do not own the property.
At the risk of muddying the water, on occasion as an investor I will sometimes “eat” a tax credit due me (remember my county is the reverse of yours) as an inducement for the seller to take my offer. In your circumstance you could offer to “eat” a tax credit due you when you sell if you think that might be appealing to the buyer. In other words this can be used as another bargaining chip to use when appropriate.
Posted by JohnBoy on December 06, 1998 at 19:59:43:
In the county I live the lender determines whether or not they require taxes to be escrowed or not. I just closed a deal last month where the lender does not escrow taxes. The seller had to credit me the taxes for 1998 up until the day of closing. I did not have to pay any property taxes for 98 in advance. When the tax bill comes due for 98 in 1999, I will have to pay the entire tax bill since I’ve already recieved the credit from the seller on the taxes they would have owed.
If your paying cash then I would think you would need to come to closing with less cash then your purchase price. The difference coming from your seller in the way of a credit for their share of the 98 taxes up until the day of closing. Unless your state has some law that requires different, you should recieve the sellers share of taxes as a credit in your favor and have that amount deducted from the amount you owe to pay for the property.
Recording fees technically, are not considerd closing costs. If you mortgage the property, you will pay for recording the mortgage. Deed recording is usually considered a buyer’s expense. Deeds don’t have to be recorded in order for title to pass, so sellers aren’t charged for same; however, it would be extremely foolish not to record one’s deed.
Real estate taxes are also not considered to be closing costs. They are paid according to the terms of the sales contract. As far as paying taxes in advance, or anytime for that matter, this is usually up to the property owner. I think it’s a bizarre law that would require someone to pay July '99 taxes in December '98, but I don’t know where you are so I can’t help on that part of the question.