How Does The Property Tax Get Paid At A Closing?
A question we often hear at closing from sellers is: “Who is paying the current year’s tax bill and how is it being paid”?
Taxes are collected annually and some counties collect twice a year. There are typically county and city tax bills that are due. Tax bills are typically collected towards the end of the year in Georgia. September – December.
If the tax bill has not been released for the year the taxes will be based on the prior year. On the HUD (final settlement statement) the bank/lender will require you (the buyer) pay the tax bill in its entirety when it comes out/due later in the year. If you have an escrow account this will be funded accordingly to ensure that the bill can be paid in full when it comes due. The seller will reimburse you on the HUD for his portion (January 1 – your close date).
If the tax bill has been released then the seller will pay the tax bill in its entirety for the year and you (the buyer) will reimburse them for your part of the year. This is typical later in the calendar year per above (tax bills are released later in the year).
Something to note…with or without an escrow account…if the tax bill has been released by the county/city to the closing attorney then the taxes MUST be collected on the HUD. This includes refinance transactions. Folks without an escrow account often will see taxes collected at closing and assume this is an escrow account when in fact it is not.
Banks require the taxes be paid as they want to avoid a potential tax lien should the bill not get paid. This mitigates their risk.
Max A Kallos