If you purchase real estate on any day aside from the first day of the calendar year, you need to negotiate a proration of real estate taxes with the vendor. Property taxes are often escrowed from the lending company throughout the year in order that full payment for the taxes can be made at the end of the year when the bill is expected. If you purchase a home during the entire year, the vendor of the home occupies a predetermined amount of real estate taxes depending on the amount of time that he owned the home. Because the last tax bill is not always ready at the time of sale, many lenders use the prior year’s real estate tax amounts to gauge that the current year’s tax bill.
Find a copy of the tax bill for the year, if accessible. If the current bill is not yet available, get the property evaluation together with the estimated home value and real estate tax for the entire year. If the evaluation with estimated tax is not accessible, use a copy of the prior year’s real estate tax bill to determine out the prorated tax amount.
Divide the estimated yearly tax amount by 12 to ascertain the real estate tax cost a month. As an example, if the estimated yearly tax is $6,000, divide by 12 to get a monthly price of $500.
Determine throughout the month to your loan. If the loan closes on the last day of the month, count the final month as an entire month.
Multiply the monthly real estate tax amount by the amount of full months that the seller owned the property. For example, if the final date is July 11, then the seller owned the property for six complete months throughout the year. Multiply $500 by six for a total of $3,000 in real estate tax because of the vendor. If the final date is July 31, multiply $500 by seven for a total of $3,500.
Divide the monthly real estate tax from the amount of days in the final month, even when the loan closes any day aside from the last day of the month. For example, $500 divided by 31 equals $16.13 per day at prorated real estate tax.
Assessing the daily prorated real estate tax rate from the amount of days in the month which the seller owned the house. (For purposes of this calculation, the vendor does not have the property on final day.) For our example, $16.13 days 10 equals $161.30 of prorated real estate tax for the vendor to the month of closing.
Add the monthly prorated tax calculated in Step 6 into the entire month’s calculation in Step 4. For example, $3,000 plus $161.30 equals a entire amount of prorated real estate tax because of the vendor of $3,161.30.