Recently, I asked my trusted Real Estate attorney, Mark Edison, to briefly discuss a common question that arises regarding property tax credits paid by the seller during the sale of their home or investment property. Mark represents buyers and sellers throughout the Chicagoland Area with their Real Estate transactions. Below is his response.

A common question many sellers have when calculating costs pertains to tax credits. Most sellers understand that taxes are paid in arrears. However, confusion arises at the closing table as sellers are generally obligated to give tax credits to the buyers for the current tax year. Many sellers state, “I pay taxes every month with my mortgage” and do not understand why they have to also credit the buyer at closing.

Although it may be true that sellers do in fact pay into escrow each month with their lender for taxes, it is important to understand that tax bills come out twice every year and the tax escrow established with the lender must be seen as independent from the contract with the buyer. These tax escrow accounts are maintained by the lender and disburse only when the tax bills are issued. It may be true that the escrow with the lender is more than adequate to pay the second or first installment of the tax bill, however, most lenders retain this money until they receive the payoff from the closing proceeds. By law, the lenders must return the escrow amounts to the seller after closing and it is almost always sooner than 30 days from the closing date. However, it is very important to contact your lender and inform them you are selling your property and provide an updated address where they can forward the check.

If you are interested in using Mark Edison for your home or investment property purchase or sale, feel free to contact him at markedison@yahoo.com.

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