A residential property in Colorado has an actual value of $600,000. The residential assessment rate is 6.95% and the total mill levy is 100 mills. The closing date is April 1. Colorado property taxes are paid in arrears. What is the seller's tax proration credit owed to the buyer at closing? (Use a 365-day year; the seller is responsible for January 1 through March 31 = 90 days.)
Correct Answer
B) $1,028
Assessed value is $600,000 x 6.95% = $41,700. Annual tax is $41,700 x 100 mills / 1,000 = $4,170. Using the stated 365-day year and seller responsibility for January 1 through March 31 (90 days), the seller credit is $4,170 x 90 / 365 = $1,028.22, which rounds to $1,028.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
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Previous Question
A Colorado broker is closing a transaction on March 15. The seller has already paid the first half of the property taxes (due February 28) but has not yet paid the second half (due June 15). The annual property tax is $3,600. How should the property taxes be handled at closing?
Next Question
A Colorado county assessor reassesses all properties in the county every two years as part of a general reassessment cycle. A homeowner receives her new Notice of Valuation and discovers her property's actual value has increased by 20%. She is concerned her property taxes will also increase by 20%. Her broker explains that a 20% increase in actual value does not necessarily mean a 20% increase in property taxes. Which of the following best explains why?