A buyer's agent is explaining the tax proration line on an Illinois closing statement. Why does the seller typically owe a credit to the buyer for property taxes that have not yet been billed or paid?
Correct Answer
D) Illinois property taxes are billed and paid in arrears, meaning the bill for a given year is not paid until the following year, leaving the seller owing for months of ownership before the bill is issued.
Illinois operates on an arrears property-tax cycle: taxes that accrue during a given calendar year are billed and collected in the following year (e.g., 2024 taxes are paid in 2025). At closing, the seller has owned the property for part of the current tax year but the bill for that period will not arrive until after closing. To compensate the buyer—who will eventually pay the entire bill—the seller credits the buyer at closing for the seller's proportionate share of the estimated tax liability. This is why proration mechanics are central to Illinois real estate closings.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Adverse possession is a legal doctrine that allows a person to claim ownership of land by occupying it continuously for a statutory period under specific conditions, without the true owner's permission.
A bargain and sale deed implies that the grantor holds title and possession of the property but does not include warranties against encumbrances or title defects.
The chain of title is the sequential history of all transfers of ownership for a specific property, from the original source (typically a government patent or grant) to the present owner. An unbroken chain is essential for marketable title.
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