At a real estate closing, how are property taxes typically handled when the tax year has not yet ended?
Correct Answer
B) The seller is debited and the buyer is credited for taxes accrued from January 1 through the closing date
Property taxes are prorated at closing so that each party pays only for the portion of the year they owned the property. Because Mississippi property taxes are paid in arrears, the seller owes taxes from January 1 through the day of closing. This amount is calculated as a seller debit and a buyer credit on the closing disclosure. The buyer then assumes responsibility for paying the full tax bill when it comes due, having already been compensated for the seller's share through the credit received at closing.
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Related Topics & Key Terms
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Related Concepts
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
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