Property taxes can be tricky! From state to state, property taxes are treated differently. Indiana is currently a year behind in property taxes. This means that the spring and fall installment paid in 2013 is really for 2012!
What happens to the unbilled taxes when I purchase a home?
Purchase agreements have a section specific to how real estate taxes are handled. In most situations, the seller prorates the unbilled taxes to the date of closing. This amount is given to the buyer as a credit from the seller and final.
Will my tax bill stay the same?
Maybe. Property taxes are based on a percentage of the assessed value. If the assessed value, percentages, and the owner’s deductions don’t change, the bill will remain the same.
What are owner’s deductions?
In the state of Indiana, there are many reasons for a homeowner to get additional deductions against their tax bills. Indiana gives credit to owners who are owner occupants with mortgages. As well, there are disabled vet credits, age exemptions, geothermal exemptions, and much more.
What do I need to watch out for when I purchase a property in Southern Indiana?
BEWARE! I have run across numerous people who are in financial binds because of property taxes. For example, a buyer purchasing a foreclosure with a fixed budget allowing for the previous tax bill and standard principal and interest may be in shock when they purchase their home and their tax bill doubles. The last tax bill at the time of closing may have been when a previous owner occupant had deductions and after the deed switched to the bank, all of those exemptions may have been removed which results in taxes doubling. At that point, their mortgage company may want the differences in taxes caught up immediately and an increase in monthly payments to accommodate the new tax bill. This hike in payment could go on for a year until the new homeowner’s exemptions are in place.
For example, John and Jane purchase a home in January of 2013 with an annual tax bill of $1200. At the time of closing, the title company uses the 2011 payable 2012 tax bill (the last one available) to calculate the proration. John and Jane’s mortgage company uses the tax bill of $1200 to calculate their escrow. During 2012, the property is deeded to the bank and the exemptions are lost. John and Jane receive a spring tax bill spring of 2013 for $2400. They do not have enough in their escrow so their mortgage company wants the difference that was paid plus the difference monthly!! Can you see why this may be a problem?
I look out for all of my clients when it comes to housing affordability and potential tax bills. My clients are educated about potential tax bill increases and different variables that may take place. Utilize experts when purchasing your home! I know what to look out for so that I can look after my clients.