Who pays the property taxes, utilities and other costs associated with the property?

The payment of these third party costs will depend largely on the billing cycle for each. Property taxes are often the most confusing thing for buyers. Property taxes are payable to the municipality once a year, and the payment date is in the middle of the year. The payment covers the calendar year, which is where the confusion can occur. Sellers can think that by paying in July, they are paid up until the following July, which is not correct. The seller will be responsible to pay for those days in the calendar year for which the seller is the owner of the property. With the property tax payment being due in July, if the transaction completes prior to taxes being due, the responsibility to pay is shifted to the buyer, with the seller simply paying its share to the buyer on closing through an adjustment (reduction) to the purchase price in the amount of the tax attributable to the seller.

If the transaction completes after the property taxes are due, the seller will have paid these so it will seek an similar adjustment from the buyer. The buyer then must pay for those days remaining in the calendar year by reimbursing the seller in an amount that is in addition to the purchase price. This is where the Buyer may be surprised and have to scramble, especially if the property taxes are a significant amount, as a purchase in mid July of a property where property taxes are $4000 annually would result in the buyer having to pay close to an additional $2000 at closing.

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