Sunday, October 14, 2012

R's tax proration discussion continued

Hello Diane

Thanks for the info.  I looked at the sales contract from this past summer...here's what I found about prorated taxes:

"PRORATIONS: Taxes for the current year, maintenance fees, assessments, dues and rents will be prorated through the closing date (Jun 26, 2012).  The tax proration may be calculated taking into consideration any change in exemptions that will effect the current year's taxes.  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 (in this case they were available Oct 1).  If taxes are not paid at or prior to closing, Buyer will be obligated to pay taxes for the current year."

So in this case, taxes were not paid at or prior to closing.  But I didn't take ownership of the property until Jun 26, yet I could still be liable for taxes owed during a period when I didn't even own the property?  My other frustration is that this stipulation in the contract is buried in the fine print...and if I don't happen to find this phrase on closing day, I'm stuck with all taxes?  I'm no expert on closing contracts.  If I was, why would I pay the closing agent to do anything?  I guess my other question...who should have made me aware of this?  My realtor/agent, the title company representative, or the building/owner?

And knowing this verbiage from the contract now, how would you proceed?

Thanks

R

Hi, R:  This is not unusual.  We all as consumers sometimes ignore the boilerplate in contracts but that doesn't mean that those words have no meaning.  As a buyer you are on your own unless you hire an attorney specifically representing you or you have a true buyer's agent.  The title agent, even if they are an attorney, is not acting the capacity of buyer counsel.  In fact, typically the sales contract is already negotiated before the title agent enters the transaction.  Buyers need to read their sales contracts and if they aren't sure, they need to hire an attorney to advise them.

You might still at least contact the title agent by email or phone to ask them how or why they calculated the prorations.  See if their explanation makes sense now that you have read that portion of the sales contract. If they clearly demonstrate that they were following the instructions contained in the contract, you have your answer. 

You might also want to talk with your real estate agent to see how they interpret this language in the sales contract.  Perhaps the agent can shed light on local custom or may even agree with you that there was an error.

I hope this information is helpful and I thank you for sharing your experience as I am posting it on the blog because I think it will help other home purchasers.

D

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