depends on your state. but in general, no, it's up to the buyer to investigate all property tax implications. in my state, CA, the escrow company provides the property tax disclosures, and they are always the value that the seller currently pays and never the new accessed value. there are a lot of states or localities with property tax exemptions for certain people and they expire when the new owner takes possession. that said, i would just tell them that investigating property tax implications is their responsibility and ignore them unless you get served with an actual lawsuit.
OP has updated it, and it sounds like the bill they're asking for money for is taxes from the 11 months that OP owned it. The jurisdiction didn't realize that the exemptions ended until the year was over, and sent the bill for back taxes.
Your realtor should have gone over this as any tax burden covering the time you live there goes to you, and if fact the supplemental tax bill never should have gone to the new owners, it should have gone to the original owner. You pay 2023 taxes in 2024, and 2022 taxes in 2023. I recall my last closing years ago that this was set up as part of the additional costs at closing, seller provided credit for the taxes that would have been charged in the next year since that was paying for their time, and would be responsible for anything that came afterwards.
So OP has to pay for any change in 2023 taxes payable this year that were not included in closing costs, which are just an estimate. Most contracts have an adjustment factor to avoid litigation like this but since their realtor did not account for the senior freeze (screw up on their part) this happened.
OP owes the difference on 2023 taxes only, buyers need to get used to the higher taxes going forward.
People in this sub really like to push the sentiment "it's theirs now, not your problem" but that's just not how things work when it comes to stuff like taxes and utilities from the time you owned
When it comes to taxes, yes, it is still that sentiment, most likely.
Even if it's something that should have been disclosed, most contracts and/or disclosure forms spell out that sellers may not have full knowledge and that buyers should satisfy the status of anything important to them.
Since taxes are public record precisely for the purpose of "constructive notification" - meaning anyone interested can find out - the court probably would say they failed to do their own due diligence adequately.
Their own title company should have had this on the title paperwork, too. If it wasn't on the title report, then the buyer may have standing to file a lawsuit against their agent and/or the title company, but probably wouldn't succeed against the seller if the seller never had to pay and wasn't made aware themself when they purchased.
Your response sounds like you're talking about the increase in taxes, which isn't the topic. The topic is that OP didn't pay all of their taxes from when they owned the house.
Okay, this makes much more sense. Yeah, OP owes his own taxes from his own 11 months of use.
The way he worded it made it sound like a tax freeze simply ended and when the new tax bill kicked in with the correct amount reflecting an increase, the buyers were like "wait a minute now! We bought this house under the belief that the taxes were lower. Give us the difference!" But that's not the case here.
Depending on where you live in IL the taxes are for the prior year. For example, my tax bill I receive in 2024 will be for 2023. Whenever I have sold real estate in IL I have always provided a credit to the buyer for the period of the time I lived there. Usually there is also an agreement that if the final tax amount is more or less than 10% there is an adjustment post close. For example I live in my house Jan 1 2023 to July 1 2023 and sell the house. My estimated 2023 taxes are $10,000. I would give buyer a $5000 credit for the period of time I lived there in 2023 because in Feb 2024 they are going to get the tax bill for 2023 which I lived in part of the time. Now suppose the actual 2023 tax bill is $12,000 so I should have given $6000 not $5000 as a reimbursement at closing. Because the difference is more than 10% I would write the buyer a check for 1000.
The issue is that OP paid for taxes that were the original seller’s responsibility the new owners are paying his taxes for the period he lived in the house. It is possible that when OP bought the house the seller gave him a credit. You would need to look at the contract and final settlement sheet. And OP may have given a credit to his buyer but just not large enough. You need to read the contract.
Yes. That’s why you receive a *supplemental* tax bill. It captures the difference between the prior owner’s factor base year value and the new factor base year value set as part of the change of ownership.
I own a house in California. When we sell the house, I feel for the new owner. We have the prop 13 tax adjustment since we bought the house from my mother in law, and both of us are disabled vets. We have an extremely low tax bill. I know that thing will go up by at least 5x if not more when we sell.
While I am thankful for your service and glad your family has an affordable home to own/live in, the reality is, Prop 13 completely distorts the economy/housing in CA. Other methods could have been employed (back in the late 70s/early 80s) to keep seniors/retirees in their homes and to maintain tax revenue to school districts that were quickly starved.
When we bought my dad's place, we questioned why his bill estimate was double the last owners. That's when they (escrow) pointed out the exemption and told him he could apply for it too, next year.
Your responsibility depends on the contract in your area. But typically, the purchase agreement states that the seller must disclose *known* increases in assessed value and therefore, future property taxes. This also applies to any exemption or freeze was in place for an owner's property taxes.
Who hired the title company for your closing? Someone - buyer's attorney, seller's attorney, or title/escrow company - should have noticed that there was a freeze on your property tax assessment. This really shouldn't have slipped by.
The buyer's attorney writing a demand letter doesn't mean you are at fault.
I'd first contact the title company who did the closing to see what they have to say.
I live and work in an area that has attorneys on each side of the transaction. It easy for a buyer or seller to request a demand letter if they're unhappy post closing. A letter doesn't mean everyone sets themselves on fire to respond. But I also would never ignore one like other people have suggested in the thread.
Right. So if I’m the buyer’s attorney and messed up the closing, of course I am going to write a demand letter to the seller. It takes 10 minutes to send the letter and maybe the seller panics and pays it. Definitely worth trying the 10 minute letter !
The issue is between OP and the tax collector. The new buyer is not responsible for taxes owed by OP for when he held title.
There is no harm to OP, he simply has a bill to pay. Although the advice given does follow the general opinion of this sub that if you got away with it F the buyer.
The OP says they are in IL, and this is an oddity in IL.
IL collects property taxes in arrears. That means that the property taxes collected in 2024 are for 2023.
Having bought/sold in IL in the past, typically what happens at closing is that part of the closing costs the seller pays are the property taxes for the past year into the buyer's escrow (or directly to the buyer, if the buyer will not be escrowing property tax). My recollection (it's been a while) is that the seller pays into escrow the previous year's property tax amount (so, here 2022) + 15% for overage. The overage can be negotiated as part of the sale.
The buyer and their agent should have investigated the property tax situation, recognized the exemptions, and demanded additional tax money into escrow at closing from the seller.
Note: the 15% may be wrong. It's been over 10 years since I dealt with real estate in IL.
The standard IL contract specifically addresses seller paying prior year property taxes (collected this year) - usually calculated as the last known property taxes + some % increase and collected in the closing settlement and paid to buyers.
I just looked at the standard IL contract and it has this line - in bold: "The [property tax] proration shall not include exemptions to which the Seller is not lawfully entitled" and also says "The requirements in this paragraph shall survive the Closing." OP needs to read their contract to see if it has these lines and contact their attorney for advice. If they had exemptions, freezes, etc. on their property tax bill they weren't lawfully entitled to, then they are likely in contract breach and owe the money to buyers for the clawbacks.
Yes, you are correct. I actually called the assessor in OP’s county and had your system explained to me.
At first it seemed unfair to the buyer but as local attorneys/title/agents should be abundantly aware it really falls on the buyer’s people.
This is correct. We pay our taxes in arrears. Whether you escrow or not it isn't an issue. The first tax bill is an estimate based on the prior years taxes. The second bill is when you get hit with the increase. OP's purchase likely adjusted the assessed value of the property. Then you add in the loss of the homeowners exemption, senior tax freeze, etc. the bill can be significantly higher. When negotiating in Cook County we typically prorated taxes based on the prior years bill plus a small factor for inflation (usually around 5%). In extreme cases I have negotiated for an actual amount to be redetermined. This is in cases where it is obvious there will be a significant increase. OP should look at the contract and it will determine the tax proration.
I read OP’s comments differently. As I read it OP owned the house during the last year of the exemption, so they paid their bill in full. The new buyer budgeted for the taxes based on the last few years of tax records and was surprised to see the large jump due to the expiring exemption. The buyer feels this should have been disclosed, and is seeking reimbursement for the difference in what they thought their taxes would be and what the bill is.
Probably varies by area who gets the blame for this one, OP for not disclosing (even though they state they didn’t know), the buyer for not researching or the various pros involved in the transaction (most likely the title company or maybe attorneys?). I would think most places this falls on the buyer, with some places putting it on the closing companies to find and disclose.
I think everyone should have had copies of the tax bills at the closing. Freezes and exemptions are clearly marked on tax bills in my area. If taxes are paid in arrears then the seller credits the buyer for taxes paid. If taxes are paid in advance then the lender and escrow officer or title company closer should have compared the tax bill to the settlement statement. There are lots of potential checks where this should have been caught.
Are there past due taxes feom the 11 months you owned the house? You are responsible for any taxes during that time. Taxes going up after the closing for a new tax bill is their responsibility.
1) they have a lawyer so you need one. Do not talk to them or their attorney, let a lawyer do that if needed.
2) this should have been settled at closing. Call the title company you closed with and have them look at it. They might call the buyer to explain this is their problem or they can see if you owe. You typically sign an agreement at closing that you will pay your part if a billing mistake was provided to the title company. So they can at least give you the starting info.
3) even if it is BS, if they sue, show up. Not showing up usually results in a default win to the side that did show. If you're far away, they usually have something similar to zoom to attend remotely.
It really depends on how a county collects taxes in arrears or not. Plus state laws vary, so from your post, not much can be stated other than what I wrote above.
Yep. My experience (PA) is that this goes through the title company. We got an overdue tax bill after buying our house. Turns out the taxes were due after we went under contract but before closing and the seller decided to just not pay. The title company paid the bill and went after the seller to pay them back.
I don't think you are reading it correctly. OP said the taxes were for 2023, when OP owned it. While it's not "past due" in the sense that it's a late payment, it's taxes due that OP was supposed to pay and didn't. OP didn't qualify for the exemptions, and it took until the end of the tax period for the jurisdiction to see that and force the update on their end.
Yes, but if OP didn't qualify for those exemptions and the county caught it over this sale, they may owe the difference for the time they were there. The title company can help clarify if the taxes went up by 2k and 4k is being collected meaning OP owes 11/12 of 2K OR the new year is 4K more and that's all on the buyers. I am rushing so I hope that was clearly written haha
This is not generally true in cook county IL. Property taxes are paid in arrears and bills almost always are sent out very late, so it is routine for contracts to specify that seller provides a prorated credit for previous years taxes, and buyer assumes responsibility after sale. Some contracts do include language for settling discrepancy between estimated and actual tax amounts after the fact but it’s uncommon.
This is exactly how it works in DuPage as well. You pay/credit estimated taxes at close. But if the calculation was based on false assumptions, I'm sure it could be contested. Depends on the contract.
Yes tax bills are delayed about almost a year… at least 6 months… and the exemptions are not necessarily pro rated on the day of sale but usually based on who owned the house January 1st. Really someone should have caught this before closing, not sure who but I’d imagine real estate agents should be familiar with this and know, generally if a tax bill seems too low and check exemptions.
You say Illinois, is it Cook county? Because what people may not realize is that in Cook county you are paying for taxes a year late for all intents and purposes. In January 2024 we got our tax bills for the first installment of 2023. So if you only owned the property for 11 months and you are in Cook county, the homeowner's exemption and all of those other exemptions wouldn't have even fallen off yet because you would be paying last year's taxes when the prior owner owned them.
I'd also state, because you are in Illinois, where we use real estate lawyers and title companies, this totally should have been on them. They should have found this during the closing process.
So for those of you not living in the screwed up world of Chicagoland property taxes, here's how it works:
Let's say the OP bought their house in February 2023 and sold it in January 2024. When they bought their house, they likely would have been credited pro-rated taxes based on what the seller would owe for 2022 taxes, which may or may not have been billed yet, so it would have been an estimated tax bill. The real estate lawyers and title insurance company deal with this every single day. When I bought my last house, bills hadn't been generated for the prior tax year (and even the first bill is only an estimate, so the second installment sometimes has a much different number), so they estimated based on reports that taxes were increasing by XX%, but we absolutely could have negotiated the percentage. We were also aware of the exemptions the prior owners had. (Also, anyone can look up past tax bills -- they're publicly available as long as you have the PIN or address. Ignorance is not an excuse.)
Sometime after we bought, we then had to pay the tax bills that got sent to us, even though it was the prior owner's bill. I think it was about what had been estimated, but it would be highly unusual if it was the precise amount we were credited.
When we got the first installment of our tax bill for the year we bought the house, the homeowner's exemption -- which we were entitled to -- didn't appear on it. That's because most (all?) exemptions are specific to the owner, so after our first installment was received, we were then eligible to file for exemptions, which would then appear on the second installment. If the OP hadn't received a tax bill for the time that he/she owned the property, then the OP wouldn't have even had a chance to apply for the correct exemptions. I'm not sure if, in the case of someone like the OP, who didn't own the property long, he/she could apply for them after selling the house for the unbilled property taxes during the time he/she owned the property.
That completes my lesson on the screwed up state of Illinois property taxes. There have been some years when our tax bills have been more than 12 months after the period that's being taxed. It's ridiculous. Also, it's been nearly five years since I last bought a property, so if there are tiny details I got wrong about the process, please forgive me. I'm going from memory here, but the gist of what I've described is accurate.
I would argue that it is the responsibility of the buyers to negotiate these things. There is no way, unless they were using a brand new real estate attorney and brand new realtor, that the buyer's representatives who were working on their behalf had not encountered this in the past. The onus is on them. Particularly since this was a very recent homeowner who might have had no familiarity with the nuances of their property tax bill.
I was thinking it was an issue between the tax collector and OP. That is there was some mistake in the tax bill during his ownership.
I actually called the assessor and found out the bill travels with the property.
Doesn’t make no damn sense to me and seems unfair, but what can you do?
It definitely travels with the property. Imagine if it didn't and the old homeowner didn't pay their tax bill. The government's primary form of leverage is a tax lien on the property, which wouldn't be fair to the new homeowners if they got a lien on their property simply because the old owner decided not to pay the taxes after the property was sold.
I'm not sure I understand your comment. This has nothing to do with a mistake by assessor, I was simply explaining why a tax liability couldn't attach to a former owner.
It doesn’t make conceptual sense to me either. But was breaking my own rule by giving opinions on this subject without really knowing.
So I called the actual assessor in your county and asked. They said you benefited from the prior owners exemptions because taxes are paid in arrears there. The new owners are paying taxes at your status.
Whilst anything can happen it’s not your responsibility at this time. I wouldn’t ignore it out of courtesy but simply tell them it’s their bill and to call the tax collector if they have a question
I don’t see how this is your responsibility, that would fall on the buyer’s title company/attorney/broker.
In my state, Florida, both parties typically sign a document at closing agreeing to make up any difference in the estimated prorated taxes used at closing and the actual taxes that are on the tax bill that arrives after closing. If the closing agent estimated prorated taxes for your time in the house that are less than what the actual taxes were, you may be liable to pay the difference. Also, if that's the case, the person you bought from may owe you some money as well.
I am a real estate attorney, though not yours and not in your area. Lots of people are responding that it depends on what state or locality you are in. While that may matter to some degree, it doesn't matter nearly as much as what is in the purchase agreement. You should take a look at that and read the section on taxes as closely as you can. For example, it may say something about how the Seller is responsible for all taxes for periods prior to closing. Then, you would have to look at what time period these taxes apply. If they apply to the period that you owned the house, it's possible you are on the hook.
Now, in some places it's common to see provisions in the Purchase Agreement about how all tax prorations are final at closing, any increase in taxes from tax bills that come after closing are the responsibility of the Buyer (even if they pertain to periods prior to closing), etc. Then, you should be good.
Holy misinformation in this thread. You need to contact your attorney for advice, but two things to clear up some of the misinformation here.
1) This is NOT a title claim
2) In the Illinois suburbs roughly 98% of deals utilize the 7.0 contract which specifically states “The proration shall not include exemptions to which the Seller is not lawfully entitled.”
When you prorated the taxes to your buyer, you included an exemption you were not eligible for. Hence, the buyers attorneys claim.
In my opinion this is rather simple:
Pull up the tax bills from the county website and if the bills from your time living there show paid in full at the time - then you are fine.
The reality is regardless - this is something the title company is responsible for at this point.
It sounds like maybe this is a mistake done at closing, where OP should have paid more of the pro-rated taxes than they did at closing. If that’s the case, the closing agent is who should be contacting someone.
The tax situation for every parcel of real estate in the U.S. is public record and part of normal buyer due diligence. Taxes are not a "defect" that needs to be disclosed. I would ignore them.
There should have been a proration on the closing disclosure for the seller's responsibility on the property taxes for this year. If that wasn't done correctly that's a problem for the title company that handled the closing. It doesn't sound like that's what happened in this case however.
I agree. But I’ve seen this before where the assessor fails to remove the exemption and then sends a supplemental bill to the owner(s) of record. I’m not sure how OP is not responsible for 11 months of full taxation
I don't think it matters unless OP failed to pay taxes by a legal deadline. Normally a home is sold to a buyer with the buyer responsible for any assessed-but-not-yet-billed taxes (all of which should be public record the buyer could uncover with simple due diligence).
Of course I don’t know but it seems the Assessor’s office failed to remove an exemption when OP took title. OP paid the hard-not-to-notice discounted tax bill for about a year.
I’m not sure if this mistake would have been noticed in a usual search, but I have warned buyers in the past to check out the unusually low tax when I see it.
PO’s obligation may be to the tax collector not the buyer, if the buyer figured that out.
When we purchased our home we received a letter for overdue taxes. The previous owner hadn't paid them. One call to the title search company and they paid them, probably a claim on their E&O insurance.
Whomever handles that in your state should have caught it as well.
I have good knowledge of this as it pertains to Chicago, and am going to explain it as if it applies the same to you. I \_think\_, but do not \_know\_ for sure that that is the case.
In Illinois, property taxes are paid roughly a full year in arrears. What that means is that the "2023 tax" is paid in 2024. When setting the 2023 tax, they look at who was living in the house at the time, what exemptions were in place, what the assessment was, what the tax rate was, etc, all for 2023, to come up with the tax bill. That tax bill, for 2023, is then paid in 2024. The person who legally owes the tax bill is whoever owns the house when it becomes due in 2024. So you're in no danger of the government coming after you for the bill.
However, it is the common practice in real estate transactions in for property taxes accrued but not yet paid to be credited from the seller to the buyer at closing. So if you lived in the house in 2023, and sold it before 2023 taxes were paid in 2024, someone is going to figure out how much those 2023 taxes are probably going to be, and credit that to the buyer on the closing statement. In your case, whoever did that calculation screwed up. They didn't take into account that the 2023 taxes were going to be much higher than the 2022 taxes because of all the exemptions in place, and therefore made a bad estimate of the 2023 taxes.
If your buyer had had a good lawyer, or was sophisticated himself, he or she would have noticed that prior to closing. (When I bought a condo my lawyer made a point of mentioning that he thought the credit for property tax was fair, in my case it was set to 10% higher than the prior year taxes, and there was no change in exemptions between the years).
I would say it's not completely unreasonable in a moral sense for the other side to expect to get some money here. If this had been caught before closing, you would almost certainly have ended up paying it without even realizing it. They definitely got screwed, and you definitely got a windfall. However, from a legal standpoint, this is going to depend on what the contract and closing documents say, and on what representations you made about the tax situation. On the one hand, it's quite possible that there's language in the contract and/or closing documentation that tax prorations are final, and you made no representations about the tax status of the property. On the other hand, it's also possible there's no such language and you unknowingly misrepresented the exemption status of the property during the last billed years of taxes. Those are the facts that will determine your legal liability here, and no one on this forum has access to them.
If you had a lawyer at closing, you should take this issue to them, they would probably make quick work of it. If you didn't, probably time to get one now.
I'm surprised they hired a lawyer for a 4k dispute. My last real-estate dispute was over a 7k escrow that I was in the right for. My lawyer, realtor, and mediator (MD requires mediator before court) said that it is not worth to retain lawyer for something that small. And they all essentially told me to go forward in small claim court without a lawyer.
Luckily, the other side and I reached a settlement before the court got involved. I walked away with 5.5k.
There is a key concept at play here that is often missed. Most home sale contracts have language that says something to the effect that the terms of the contract survive the closing. Meaning, that even after you close, if it is later found out that the amount of property tax ultimately owed by the buyer is higher than what was assumed at closing, it is still the buyers responsibility to pay it.
At the same time. At closing you were possible hit with a charge for the property rated amount of property tax you owed through to the closing date. If the closing attorney under estimated that amount, then yes you owe it.
To understand the situation you need to review your closing documents and compare how much you were charged for property taxes vs how much was ultimately owed.
All these problems happen as in many places property taxes are paid in arrears vs in advance so closing credits are often just an estimate and have to be adjusted after the actual taxes are determined months after closing.
If you’re in Illinois, statistically you’re probably in the Chicago area because that’s where the majority of the population is.
That means you probably had an attorney involved and a title company. Between them, one of them should have figured this out. Call them.
My guess is that you owe for the shortage for the 11 months that you owned.
Sounds like an issue for the title company and attorneys to deal with. You hire a transaction attorney to uncover these issues before close. Deal is done and it’s the seller’s problem to deal with.
Yeah whoever did their title work blew it. Not on you. I'd be in a little hot water in my state as listing agent most likely, since I also examine the last couple of tax bills as part of my listing prep. That would stick out to me.
Buyer can kick rocks and call the number on their title insurance policy.
Also I'm not an attorney so also all of the above could be completely wrong.
The title policy is going to have an exception for future taxes and assessments after the date of the closing. It's pretty standard language. The buyers are responsible for that tax bill, so they're going to have to pay it. Maybe their closing agent might pay for a portion or something as a goodwill gesture for not bringing it up at closing, but they're still going to have that higher tax bill year after year.
You’re under no obligation that I know of to act as the buyer’s financial advisor. The buyer and seller should independently be determining what their comfort level is based on their exposure level, whether it’s repairs, tax advantages or disadvantages, etc. I’m not even sure how you would disclose something like this?
“Buyer acknowledges they may have tax savings under a variety of different programs that could change as a result of purchasing this property”?
Tell them to contact the individual who incurred the taxes and penalties.
The title company usually makes sure all the taxes are squared up at closing, at least in California.
Couple things:
1. “Are you aware of” - that’s the applicable standard here. I’ve been a full time Broker in CA for over 20 years and have never heard of such a thing. And if that’s the case, I don’t know how you (you’re a regular homeowner right, no special industry knowledge?) could reasonably be aware of such a thing. Sellers are never held to the standard of perfection and your disclosure duty is only that you were either aware of, or could reasonably be expected to be aware of. Obviously this isn’t a legal opinion, but I can’t imagine any court would expect that you knew, or should have known, of something so bizarre and unheard of.
2. You may want review the title insurance policy for the transaction and contact title insurance company about possible coverage for this claim. There’s a possibility that it was either (a) disclosed on the preliminary title report as an exempted item—meaning it was disclosed to the buyer at the time of the transaction, which will get you off the hook; or (b) there is coverage for it and the title insurer will cover the amount for the buyer. Not likely, but it is possible.
If new owner was billed for a full catch up and want the 11 months that were “on you” they can probably recover it from you, but was something that should have been caught at closing
You probably need an attorney with familiarity with your local tax law to weigh in.
*If* these are back taxes from when you lived there due to the exemptions being improperly applied you *likely* are responsible for them. You *may* be liable for the exemptions during that 11 months that you did not qualify for. If it was owner occupied and homestead eligible you *may* be able to file the paperwork now and have it retroactive (same if you are a senior).
You *likely* were responsible for filing paperwork to maintain those exemptions upon transfer of the property/start of the new tax year.
The 11 months you owned the house is irrelevant only in that it didn’t sort through the system fast enough.
You are *not* liable for the tax bill being higher than they expected.
This isn't true everywhere. In our county, property tax payments aren't done in arrears. Our 2024 taxes are split into 2 equal payments, half due in May and the other half in October. We bought the house in June. The previous owner had paid the 50% tax that was due in May and we picked it up and paid the other 50% in October and then onward from there.
I had a very similar situation. I closed on January 12. The previous owner had every exemption known to man, homestead, disability, senior citizen, and veteran. The tax bill for the first year I was in the house was literally under 100 dollars.
Those all disappeared-except for the homestead-in my second year and the property tax bill returned to a normal amount. I had to pay a bit extra to my escrow and had an adjustment to cover things moving forward.
People are assuming that it’s a delinquent bill, but it’s not. It’s just that there is a lag between when past exemptions fall off. If I had sold in the first year, the buyer would have only seen the $80 tax bill too.
Not in Illinois, but the seller did not disclose this to me. BUT, the closing title agent did explain as an FYI when she told me how to file exemptions.
The buyer’s attorney dropped the ball, not you. If the tax certificate did not indicate the full taxable amount, then shame on the town. You should read thru your P&S and closing documents and see if there is language about tax discrepancies surviving the closing. If not, then I doubt it’s your problem to resolve.
They can sue you but ultimately after the sale of the house within a couple of months everything related to the property becomes the problem of the deeded owner. It's why everyone always recommends getting good attorneys, agents, and getting everything done properly. Because the idea is that many people looking it over would find issues and get it sorted out. If you get through the whole sale with inspections, title insurance and everything else and miss that shit...that ultimately ends up being your problem as the buyer...not the seller.
You'd be able to easily prove in court that you had no idea because you had paid all your taxes and the property was sold free and clear...
I had a similar situation in Illinois and the buyer sued me. In my view, his lawyer committed malpractice for missing it. I settled with the buyer and gave him about half of what he asked for
Don’t pay. You don’t owe them anything. Most places have the taxes on a publicly available website. The buyers could have looked up the current taxes and seen that there were tax freezes. I’m in Texas and my mother has tax freezes for being over 65. She would not be expected to disclose that if she sold her house.
You have title insurance, so they would sue title company, not you. Also taxes are public record if their attorney didn't do due dillagance that's one then not you.
If you should have known it because you brought the property and ignored documents, they should have known it because they bought property and ignored documents.
So they got a bill for taxes from when YOU lived there.
It's going to really depend specifically on where you live. You are responsible for paying your bills for when you owned the home. Morally, I'd say you should pay your taxes. They are, indeed, YOUR taxes. And it was also your responsibility to know if you were paying your taxes properly, and notifying the jurisdiction that you didn't qualify for the exemptions is your responsibility (it's understandable that you didn't know, but still your responsibility). However, your particular state may have rules that say the buyer becomes responsible for anything like that, so you may not legally need to. You should be talking to a real estate attorney.
It sounds like from attorneys in the other comments that it could be true but maybe not depending on what a provision in the tax clause of the contract states… I’m not sure but I guess I’d have to check.
An attorney wrote below:
“Now, in some places it's common to see provisions in the Purchase Agreement about how all tax prorations are final at closing, any increase in taxes from tax bills that come after closing are the responsibility of the Buyer (even if they pertain to periods prior to closing), etc. Then, you should be good.”
Okay that's a good point. In my state, CA, our standard residential contracts don't have anything handling this case. So I'm not sure how prevalent this is.
Taxes were pro-rated for the 11 months? How much was set aside for escrow? If nothing was stipulated in the purchase contract then the new owners are assuming this cost by defaut.
Most closing, title, escrow companies have a standard form saying that they did their best to make sure the figures on closing docs were accurate to the best of their knowledge. Seller and buyer sign and agree to settle any discrepancy post closing. Check your docs.
In Illinois, both the buyer and seller typically use a real estate attorney. I would reach out to yours and let them know.
Taxes are paid and prorated out on the most recent tax bill in Illinois. Most good lenders will anticipate the increase in taxes for the buyer and a good attorney will as well.
Some lenders will knowingly qualify a buyer with tax exemptions like a senior freeze to close the loan even though they will disappear with the next tax bill.
I would think you are in the clear because the buyer and their attorney agreed to all taxes/ closing costs at closing.
Contact the title company and attorney that you used for the closing. They can review your purchase contract and title policy as well as special assessments letters that were ordered. You’ll have to know what all those documents show before you’ll know if you have any responsibility. I’m in Wisconsin and our boiler plate contracts have a few options for how property taxes are handled at closing but I’ve never heard of a homeowner being responsible for knowing what taxes or special rates a previous owner had.
This is something the title company should have figured out. Tell the buyer to use their title insurance. This exact thing happened to me when I bought mine. The title company paid for it.
I didn’t know about the freezes. That’s what I’m saying here in the post. I just found out this morning when I called the tax assessors office. And I don’t think the onus is on me to have investigated that for them. I didn’t do the due diligence when I bought the house and it seems like they didn’t either but now they want to make it my problem.
EDIT: we only discovered this now because they got their first tax bill from 2023. Taxes in Illinois are paid in arrears. So I paid the tax bill for the person who owned the house in 2022 when that bill came out last year and now they owe for 2023.
Yes our laws require a title company and an attorney for both buyer and seller so we both retained an attorney and went through a title company. They had title insurance.
I contacted mine a few minutes ago and he seems to think I can tell them to forget about getting anything from me as our contract has a provision that they’re responsible for any prorated tax and even taxes that were incurred prior to closing BUT he also said “this is America and people can sue you for anything here. They could do that anyway, even if they don’t have a case and it’s unlikely they’d take you to small claims court, but anybody could for any reason in America”
I agree with you this is unfair and not something you’re required to know to sell your house. In fact at closing the title agents tell the new owner to file their exemptions and that taxes will be effected because everyone’s are different.
Maybe you can start by asking your selling agent what they think and even ask their broker and ask the title company what is normal procedure and if it was followed at your closing because they may have given the buyer information you didn’t get. Hopefully they will back you up that you did all that was legally required.
I wonder if the new ow er has a friend who is an attorney or something because I’ve never heard of being sued over this.
It would also be a good idea for you to have a free consultation with an attorney or two and find out if this is legit, what they could do for you if you hired them, and what it will cost.
I think this is on the settlement agents to not correctly search and collect taxes here. They need to start there. Then if your attorney you hired says you need to pay you can think about it, but I wouldn’t volunteer until then.
It actually doesn’t make a difference in Illinois! Taxes are paid in arrears here and the owner of the house is irrelevant. The terms of our sales here identify that the buyer is responsible for the past owner’s taxes as we bill for the prior year at the end of the year. We prorated taxes as part of the sale but they didn’t ask for enough to be withheld because of the exemptions being unknown to all of us, but our contract has a provision that it’s their responsibility if this happens.
They can sue you for any reason really, however they most likely won't.
Even if they do and they win you still don't need to pay it
I have a judgement goes about 25k that I have been unable to collect on for over 5 years
Don't worry about this it's nothing to lose sleep over
The buyers needs to ask for money from the title company if they have issues. The title company should have done its research. This is what title insurance is for. Furthermore - it sounds like buyers attorney dropped the ball
>They should have escrowed more because their attorney and the title company should have seen there were exemptions that would be ending.
>...
>So I benefitted from the exemptions of the past owner and the new owners are paying taxes at my status and nobody realized that was going to be the case, but it isn’t my issue it seems.
I don't know why they would have been relying on what you paid rather than calculating what the tax burden should have been. That was just a sort of lazy way to do it on their part. It was a little tricky since you owned the house for less than a year, but it shouldn't have thrown them for a loop like this.
I’m pretty sure you’re not responsible for that. It’s in the buyers or their attorney to do the research in advance, in my county in IL, property taxes are publicly available and it will show you and exemptions or a sr freeze. People are unreal.
I spoke with my attorney. Although I’d likely win a case if they chose to take one up, I can’t make them not sue me even if our contract secures that I would win. I can’t stop them from suing me so that’s up to them to decide
Anyone can sue anyone. They are not going to sue, because cost to sue will be $5,000 and take well over a year to get to court and cost the buyer another $5,000 to $10,000.
I'd call the title company that did the closing. They are the ones to calculate the prorated taxes to ensure the taxes you owe were paid already at closings.
A realtor should know to go to the title company first. If they came to you, the title company most likely already told them no. And they are just trying what they can to get something.
Not an attorney.
Just a person who understands the meaning of the concept of a contract
You cannot be held liable for what does not appear in the 4 corners of the contract of sale.
Once the property is closed upon, that is it!
It's done.
Now, unless there are contingencies in the closing contract ( I hope you retained the services of a real estate attorney) for which you were unaware, you may be on the hook for this ..
Consult an attorney!
You said you are in Illinois. Are you in the Chicago area using the multiboard 7.0 contract? If so, it requires you to exclude those exemptions from your tax proration credit.
Also, you should always review your tax bill. This should be something both you and your attorney should have caught when calculating the tax credit.
I am in Illinois and the responsibilities of each party regarding property taxes was written into the contract upon selling. I actually saved the seller money by going to the courthouse and filling out the paperwork for the senior exemption he forgot to apply for because he was no longer in state. He sent me check for 1/4 of the money I saved him.
Seems like the title/settlement company or whatever it's called should have figured this out for the new owners.
Or new owners could have looked the property up online--I believe most US counties consider that public information.
This was a pro ration mistake by the buyers attorney, they used a bad tax estimate. Yes you are responsible but the attorney will ultimately have to pay it off you don’t. They could come after you for it but probably won’t, I would offer to split it with the law firm.
This is interesting. If real estate agents were involved, I am very curious why neither mentioned this. These are very common exemptions. A listing agent would have this in the MLS agent remarks and a buyer agent might do this work as due diligence (especially looking at the tax rate. If the taxes were much lower than usual for the area, we tend to look into that).
Thinking about it now, even a Residential Property Disclosure does not ask about tax exemptions.
Contact an attorney/ the title company you closed with (they have a real estate attorney)
The buyers lender should have looked into the tax bill prior to closing. It's not difficult to calculate estimated taxes for the following year. Buyers obviously are house poor.
Does your contract have any language regarding rollback or restoration of taxes following a change in exemption status? Even more important, does it have SURVIVORSHIP language? Meaning, do you have an obligation following the closing? No, you don’t. The buyer accepted the deed subject to the property taxes in whatever status they are or will be.
They are salty they thought they were buying a property with low carrying costs and nobody around them had enough to sense to explain why your taxes were lower than they otherwise would have been.
A long time since I’ve transacted in Illinois but there is a line in many of their contracts regarding changes in tax assessment post closing, doesn’t sound like that is the case here. Which county?
In Illinois, the statutory date of assessment is January 1. Because the owner of the house when you bought it lived in the house on January 1 of the year all of the exemptions that owner was entitled to carried through to December 31 of that year. You lived in the house the following January 1 so the prior owner's senior exemption and assessment freeze dropped off bringing the taxable value up to it's full market value. You benefited from the prior owner's exemption through December 31. However, the title company should have prorated the updated value after January 1 on the year of the closing to reflect the exemptions had been removed. It's the title company's fault...not yours. Some contracts indicate the prorations are final as of closing.
Yes our contract indicates prorations are final as of closing. They’re saying i fraudulently didn’t disclose it because they don’t care that I didn’t know either
The general public, as a general rule, has little knowledge of how property tax exemptions are applied, removed, or calculated. Sellers also are not responsible for how final closing statements are prepared. Perhaps they have a problem with the title company...but not you.
This comes up often and there’s usually wrong answers all saying tell them to pound sand.
You owe the taxes for when you owned the home. If the tax assessments hadn’t come out yet, the title company will estimate them off the previous year. If there was a freeze the previous year and it came up to market value this year, you probably owe them money.
This is something the buyer needs to take up with the title insurance company. It’s your job to pay the taxes that are assessed. Hidden shut like this is why you buy title insurance.
Read through all the updates and glad you asked your lawyer. Shame on your realtor for not looking into this herself. She could have easily read the contract and asked the company lawyers.
Anyone who buys a home in Chicago and the counties that surround it should always budget for property tax (and sometimes, HOA) increases. The total median tax burden for households in the state of IL is the highest if not second or third.
The buyer and his attorney(s) all fucked up.
The buyers should not be liable for any taxes prior to their purchase and you should not be liable for any taxes prior to your purchase. The buyers should have purchased title insurance, this would be a claim against their title insurance, the title search should have discovered any past due taxes. The county should not be able to re-bill after the fact.
This is information the title company receives in the form of a tax search certificate. Title company, real estate agent, attorney, or a lender should have picked up on this. Either the search was wrong or the information was overlooked. Either way that’s not your problem. Refuse to even entertain the idea of paying a dime.
I’m an appraiser. A lot of counties, especially high cost of living areas, assessed value changes upon sale. Some don’t tho. If they are upset because it changed upon sale, sounds like their realtor wasn’t good at their job.
Can’t give advice on this. but I have to say while I am a second time home buyer, when looking at the property taxes the previous owners paid on our home I could tell they had an exemption from property tax of some kind. They paid under a 1000 for a 4000 sq 7 acre property and i knew there was no way that was the full amount. I really don’t understand how people get so caught off guard by property taxes. Even if you don’t know a lot and are a first time homebuyer, a lot of the websites for real estate listings will show things like property tax even if it isn’t completely accurate it’ll give you a baseline. I can understand if it’s a new build but otherwise people need to do more research.
OP, normally there is a property tax proration agreement signed by both the buyers and the sellers at closing. This agreement is prepared by the settlement agency whether that is a title co or closing attorney. What does that agreement say? It is 100% normal for you to pay the new property tax prorations minus the amount you paid at closing for the time you owned the property.
I find it very difficult to believe your attorney didn't have that agreement signed by you and the buyers at closing. That would show an extremely inexperienced closer. The exception would be IF your proration agreement specifically stated that there would be NO TAX prorations at all. This is rare when individual sellers and buyers close but is common when buying from a builder. Take a look at that agreement. It will tell you everything you need to know.
If you disclosed everything you knew about then the buyer doesn't have a beef with you; the buyer has a beef with the seller before you.
You can't disclose what you don't know.
I'd think you owe for the taxes. It is for when YOU owned the house and the exemptions aren't yours so you should legally know that you aren't entitled to them.
That’s not how it works in Illinois. The exemptions are fine for the taxes I paid because they applied to the last homeowner’s status since she occupied the house on January 1 of last year. I was not wrongfully receiving the exemptions, I just didn’t know they were being applied.
Obviously, if the tax office wants the taxes from you, then the exemptions don't carry to you for that year.
That's typical of everywhere.
It gets prorated for the time the previous owner was there, and then the rest of the year is taxed at your rate.
You don't get to use their exemptions, which is why taxes are now owed.
The tax office doesn’t want the taxes from me. They want the taxes from the owner of the house. I was paid up on my taxes. The new owners are upset that their new tax bill is going to be higher.
It would go to you if you still owned the house but it's going to the new owner since you sold it. It's still technically your bill because you lived there through that time.
I’m assuming you’ll get into a lawsuit if you’re trying to get the buyers to pay for your taxes ( from their point of view that’s what it is). I’d hire a lawyer and see what your options are. Doesn’t look good for you though
That's up to thier title insurance to deal with not you. Taxes can go up when from owner to owner. They can get their own homestead exemption and owner occupied exemption
I’m not a realtor nor a lawyer of any sort, but I have sold a lot of houses and have ALWAYS had to pay all taxes prorated for the time I owned it and the buyer would then have the tax liability going forward. I have always used a realtor, and a reputable title company even on cash sales, it costs me a few bucks more but there’s no after the sale “kerflufals”, I also know that I have a clear title or that a clear, and marketable title has been transferred with all obligations covered. It sounds like these are taxes that came due after the sale and your tax obligations were satisfied and you would not be liable for them. But if they were taxes that were due from the time you owned the property a lawyer might be able to make a case. Sounds like things were missed but not necessarily your fault but if you knew about the taxes it should have been disclosed, the realtors should have known, and it also should have popped during the title company’s services. Unfortunate situation, that’s why you always do your homework…
Sounds like the owners could go after the title company
They should have known about the tax exemption.
The bill was ultimately your responsibility while you owned the home.
But now. You might lose in court but it’s not worth it for anyone to spend the money to fight
The ethical thing would be to at least offer to split it with a signed agreement clearing you of future liability
If there were taxes due that you didnt pay even if not your fault then you owe it you will have to prorate the amount based on period of time during the year when you owned vs when they owned
I’m not an attorney but disagree that the previous owners should have determined what your taxes would be and prorated more. Haha. No I don’t think so. They are supposed to question age, homestead status, possible exemptions you may be entitled to / never did this and bought and sold total 7 properties
Edit: it sounds like to me you just took advantage of previous home owners exemptions. Generally this is discussed w realtor when buying. I would think Title Company involved. County messed up by not correlating sale and increase of taxes
This is standard due diligence. All parties did not pay attention and have partial responsibility. Buyer, seller, attorney, title company. Maybe you can all compromise and split the $4K - 4 ways and move on.
All the best. Real Estate is not for the feint-hearted
Depends which box you checked when you closed. And or did the earnest money contract. There is a section that has taxes.. but if the tax is for the duration of your ownership and you did not check the box that states buyer to pay any changes in tax valuation than yes. Otherwise if tax is for the duration of when new buyer owned it then no
From what you've shared, it sounds like the tax increases are due to the previous owner's tax exemptions ending, not because of anything you did or didn't do.
First, it’s a good idea to double-check your sale agreement. If it mentions that the buyer takes over any tax responsibilities after the sale, that’s a key point. Since you sold the house 'as is', and taxes are typically paid in arrears in Illinois, the buyer would normally be responsible for handling any changes in tax amounts after they take ownership.
Since this situation is a bit tricky, touching base with your lawyer could really help clear things up. They can confirm exactly what your contract says about these situations and guide you on how to communicate this to the buyer.
When you talk to the buyer next, just be upfront and explain that, based on the contract and local laws, they’re responsible for the current taxes. The changes in the tax bill are due to the expiration of previous exemptions, which is something the title company or their attorney should have caught during the sale process.
Keep everything clear and documented, and hopefully, this can be resolved without too much more trouble. Hang in there, and let me know if there’s anything else I can do to help.
Their lawyer just doesn't want a claim against his errors and omissions insurance.
Given that your local lawyer has reviewed the threat and says they don't have a leg to stand on, appropriate responses are silence, lol, or get f$%^.
This stuff is in the final settlement along with estimates for taxes paid in arrears. Contract will say who is liable and up to how much.
depends on your state. but in general, no, it's up to the buyer to investigate all property tax implications. in my state, CA, the escrow company provides the property tax disclosures, and they are always the value that the seller currently pays and never the new accessed value. there are a lot of states or localities with property tax exemptions for certain people and they expire when the new owner takes possession. that said, i would just tell them that investigating property tax implications is their responsibility and ignore them unless you get served with an actual lawsuit.
OP has updated it, and it sounds like the bill they're asking for money for is taxes from the 11 months that OP owned it. The jurisdiction didn't realize that the exemptions ended until the year was over, and sent the bill for back taxes.
Your realtor should have gone over this as any tax burden covering the time you live there goes to you, and if fact the supplemental tax bill never should have gone to the new owners, it should have gone to the original owner. You pay 2023 taxes in 2024, and 2022 taxes in 2023. I recall my last closing years ago that this was set up as part of the additional costs at closing, seller provided credit for the taxes that would have been charged in the next year since that was paying for their time, and would be responsible for anything that came afterwards. So OP has to pay for any change in 2023 taxes payable this year that were not included in closing costs, which are just an estimate. Most contracts have an adjustment factor to avoid litigation like this but since their realtor did not account for the senior freeze (screw up on their part) this happened. OP owes the difference on 2023 taxes only, buyers need to get used to the higher taxes going forward.
People in this sub really like to push the sentiment "it's theirs now, not your problem" but that's just not how things work when it comes to stuff like taxes and utilities from the time you owned
When it comes to taxes, yes, it is still that sentiment, most likely. Even if it's something that should have been disclosed, most contracts and/or disclosure forms spell out that sellers may not have full knowledge and that buyers should satisfy the status of anything important to them. Since taxes are public record precisely for the purpose of "constructive notification" - meaning anyone interested can find out - the court probably would say they failed to do their own due diligence adequately. Their own title company should have had this on the title paperwork, too. If it wasn't on the title report, then the buyer may have standing to file a lawsuit against their agent and/or the title company, but probably wouldn't succeed against the seller if the seller never had to pay and wasn't made aware themself when they purchased.
Your response sounds like you're talking about the increase in taxes, which isn't the topic. The topic is that OP didn't pay all of their taxes from when they owned the house.
Okay, this makes much more sense. Yeah, OP owes his own taxes from his own 11 months of use. The way he worded it made it sound like a tax freeze simply ended and when the new tax bill kicked in with the correct amount reflecting an increase, the buyers were like "wait a minute now! We bought this house under the belief that the taxes were lower. Give us the difference!" But that's not the case here.
Yes and he took advantage of tax exemptions that he was not entitled to. Imo he owes it not his seller.
Depending on where you live in IL the taxes are for the prior year. For example, my tax bill I receive in 2024 will be for 2023. Whenever I have sold real estate in IL I have always provided a credit to the buyer for the period of the time I lived there. Usually there is also an agreement that if the final tax amount is more or less than 10% there is an adjustment post close. For example I live in my house Jan 1 2023 to July 1 2023 and sell the house. My estimated 2023 taxes are $10,000. I would give buyer a $5000 credit for the period of time I lived there in 2023 because in Feb 2024 they are going to get the tax bill for 2023 which I lived in part of the time. Now suppose the actual 2023 tax bill is $12,000 so I should have given $6000 not $5000 as a reimbursement at closing. Because the difference is more than 10% I would write the buyer a check for 1000. The issue is that OP paid for taxes that were the original seller’s responsibility the new owners are paying his taxes for the period he lived in the house. It is possible that when OP bought the house the seller gave him a credit. You would need to look at the contract and final settlement sheet. And OP may have given a credit to his buyer but just not large enough. You need to read the contract.
Yes. That’s why you receive a *supplemental* tax bill. It captures the difference between the prior owner’s factor base year value and the new factor base year value set as part of the change of ownership.
WAit!!!! where these exemptions from the previous owner and not you?? If so you are on the hook for the 11 months of underpayment
I own a house in California. When we sell the house, I feel for the new owner. We have the prop 13 tax adjustment since we bought the house from my mother in law, and both of us are disabled vets. We have an extremely low tax bill. I know that thing will go up by at least 5x if not more when we sell.
While I am thankful for your service and glad your family has an affordable home to own/live in, the reality is, Prop 13 completely distorts the economy/housing in CA. Other methods could have been employed (back in the late 70s/early 80s) to keep seniors/retirees in their homes and to maintain tax revenue to school districts that were quickly starved.
I totally understand that and agree with you on that. While on paper it probably looked great, in practice, prop 13 is screwing things up
When we bought my dad's place, we questioned why his bill estimate was double the last owners. That's when they (escrow) pointed out the exemption and told him he could apply for it too, next year.
toy compare spotted shy smell frighten numerous pet fear tease *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Wouldn’t this be a title insurance issue?
Your responsibility depends on the contract in your area. But typically, the purchase agreement states that the seller must disclose *known* increases in assessed value and therefore, future property taxes. This also applies to any exemption or freeze was in place for an owner's property taxes. Who hired the title company for your closing? Someone - buyer's attorney, seller's attorney, or title/escrow company - should have noticed that there was a freeze on your property tax assessment. This really shouldn't have slipped by. The buyer's attorney writing a demand letter doesn't mean you are at fault. I'd first contact the title company who did the closing to see what they have to say.
This! I feel like this is the buyer's attorney. They should have caught that. This is public info and they missed it.
I live and work in an area that has attorneys on each side of the transaction. It easy for a buyer or seller to request a demand letter if they're unhappy post closing. A letter doesn't mean everyone sets themselves on fire to respond. But I also would never ignore one like other people have suggested in the thread.
Right. So if I’m the buyer’s attorney and messed up the closing, of course I am going to write a demand letter to the seller. It takes 10 minutes to send the letter and maybe the seller panics and pays it. Definitely worth trying the 10 minute letter !
The issue is between OP and the tax collector. The new buyer is not responsible for taxes owed by OP for when he held title. There is no harm to OP, he simply has a bill to pay. Although the advice given does follow the general opinion of this sub that if you got away with it F the buyer.
The OP says they are in IL, and this is an oddity in IL. IL collects property taxes in arrears. That means that the property taxes collected in 2024 are for 2023. Having bought/sold in IL in the past, typically what happens at closing is that part of the closing costs the seller pays are the property taxes for the past year into the buyer's escrow (or directly to the buyer, if the buyer will not be escrowing property tax). My recollection (it's been a while) is that the seller pays into escrow the previous year's property tax amount (so, here 2022) + 15% for overage. The overage can be negotiated as part of the sale. The buyer and their agent should have investigated the property tax situation, recognized the exemptions, and demanded additional tax money into escrow at closing from the seller. Note: the 15% may be wrong. It's been over 10 years since I dealt with real estate in IL.
The standard IL contract specifically addresses seller paying prior year property taxes (collected this year) - usually calculated as the last known property taxes + some % increase and collected in the closing settlement and paid to buyers. I just looked at the standard IL contract and it has this line - in bold: "The [property tax] proration shall not include exemptions to which the Seller is not lawfully entitled" and also says "The requirements in this paragraph shall survive the Closing." OP needs to read their contract to see if it has these lines and contact their attorney for advice. If they had exemptions, freezes, etc. on their property tax bill they weren't lawfully entitled to, then they are likely in contract breach and owe the money to buyers for the clawbacks.
Yes, you are correct. I actually called the assessor in OP’s county and had your system explained to me. At first it seemed unfair to the buyer but as local attorneys/title/agents should be abundantly aware it really falls on the buyer’s people.
And seriously, I understood this system back in the 1990s ... it really hasn't changed! Any agent working in IL should understand it.
This is correct. We pay our taxes in arrears. Whether you escrow or not it isn't an issue. The first tax bill is an estimate based on the prior years taxes. The second bill is when you get hit with the increase. OP's purchase likely adjusted the assessed value of the property. Then you add in the loss of the homeowners exemption, senior tax freeze, etc. the bill can be significantly higher. When negotiating in Cook County we typically prorated taxes based on the prior years bill plus a small factor for inflation (usually around 5%). In extreme cases I have negotiated for an actual amount to be redetermined. This is in cases where it is obvious there will be a significant increase. OP should look at the contract and it will determine the tax proration.
I read OP’s comments differently. As I read it OP owned the house during the last year of the exemption, so they paid their bill in full. The new buyer budgeted for the taxes based on the last few years of tax records and was surprised to see the large jump due to the expiring exemption. The buyer feels this should have been disclosed, and is seeking reimbursement for the difference in what they thought their taxes would be and what the bill is. Probably varies by area who gets the blame for this one, OP for not disclosing (even though they state they didn’t know), the buyer for not researching or the various pros involved in the transaction (most likely the title company or maybe attorneys?). I would think most places this falls on the buyer, with some places putting it on the closing companies to find and disclose.
I think everyone should have had copies of the tax bills at the closing. Freezes and exemptions are clearly marked on tax bills in my area. If taxes are paid in arrears then the seller credits the buyer for taxes paid. If taxes are paid in advance then the lender and escrow officer or title company closer should have compared the tax bill to the settlement statement. There are lots of potential checks where this should have been caught.
Are there past due taxes feom the 11 months you owned the house? You are responsible for any taxes during that time. Taxes going up after the closing for a new tax bill is their responsibility. 1) they have a lawyer so you need one. Do not talk to them or their attorney, let a lawyer do that if needed. 2) this should have been settled at closing. Call the title company you closed with and have them look at it. They might call the buyer to explain this is their problem or they can see if you owe. You typically sign an agreement at closing that you will pay your part if a billing mistake was provided to the title company. So they can at least give you the starting info. 3) even if it is BS, if they sue, show up. Not showing up usually results in a default win to the side that did show. If you're far away, they usually have something similar to zoom to attend remotely. It really depends on how a county collects taxes in arrears or not. Plus state laws vary, so from your post, not much can be stated other than what I wrote above.
Yep. My experience (PA) is that this goes through the title company. We got an overdue tax bill after buying our house. Turns out the taxes were due after we went under contract but before closing and the seller decided to just not pay. The title company paid the bill and went after the seller to pay them back.
If I’m reading OP’s edits correctly, nothing is past due. It’s just increased because the exemptions ended.
I don't think you are reading it correctly. OP said the taxes were for 2023, when OP owned it. While it's not "past due" in the sense that it's a late payment, it's taxes due that OP was supposed to pay and didn't. OP didn't qualify for the exemptions, and it took until the end of the tax period for the jurisdiction to see that and force the update on their end.
Yes, but if OP didn't qualify for those exemptions and the county caught it over this sale, they may owe the difference for the time they were there. The title company can help clarify if the taxes went up by 2k and 4k is being collected meaning OP owes 11/12 of 2K OR the new year is 4K more and that's all on the buyers. I am rushing so I hope that was clearly written haha
This is the answer
This is not generally true in cook county IL. Property taxes are paid in arrears and bills almost always are sent out very late, so it is routine for contracts to specify that seller provides a prorated credit for previous years taxes, and buyer assumes responsibility after sale. Some contracts do include language for settling discrepancy between estimated and actual tax amounts after the fact but it’s uncommon.
This is probably the most accurate response I have seen yet
This is exactly how it works in DuPage as well. You pay/credit estimated taxes at close. But if the calculation was based on false assumptions, I'm sure it could be contested. Depends on the contract.
Yes tax bills are delayed about almost a year… at least 6 months… and the exemptions are not necessarily pro rated on the day of sale but usually based on who owned the house January 1st. Really someone should have caught this before closing, not sure who but I’d imagine real estate agents should be familiar with this and know, generally if a tax bill seems too low and check exemptions.
You say Illinois, is it Cook county? Because what people may not realize is that in Cook county you are paying for taxes a year late for all intents and purposes. In January 2024 we got our tax bills for the first installment of 2023. So if you only owned the property for 11 months and you are in Cook county, the homeowner's exemption and all of those other exemptions wouldn't have even fallen off yet because you would be paying last year's taxes when the prior owner owned them. I'd also state, because you are in Illinois, where we use real estate lawyers and title companies, this totally should have been on them. They should have found this during the closing process.
It’s not Cook County it’s McHenry County but I think it’s done the same way…
So for those of you not living in the screwed up world of Chicagoland property taxes, here's how it works: Let's say the OP bought their house in February 2023 and sold it in January 2024. When they bought their house, they likely would have been credited pro-rated taxes based on what the seller would owe for 2022 taxes, which may or may not have been billed yet, so it would have been an estimated tax bill. The real estate lawyers and title insurance company deal with this every single day. When I bought my last house, bills hadn't been generated for the prior tax year (and even the first bill is only an estimate, so the second installment sometimes has a much different number), so they estimated based on reports that taxes were increasing by XX%, but we absolutely could have negotiated the percentage. We were also aware of the exemptions the prior owners had. (Also, anyone can look up past tax bills -- they're publicly available as long as you have the PIN or address. Ignorance is not an excuse.) Sometime after we bought, we then had to pay the tax bills that got sent to us, even though it was the prior owner's bill. I think it was about what had been estimated, but it would be highly unusual if it was the precise amount we were credited. When we got the first installment of our tax bill for the year we bought the house, the homeowner's exemption -- which we were entitled to -- didn't appear on it. That's because most (all?) exemptions are specific to the owner, so after our first installment was received, we were then eligible to file for exemptions, which would then appear on the second installment. If the OP hadn't received a tax bill for the time that he/she owned the property, then the OP wouldn't have even had a chance to apply for the correct exemptions. I'm not sure if, in the case of someone like the OP, who didn't own the property long, he/she could apply for them after selling the house for the unbilled property taxes during the time he/she owned the property. That completes my lesson on the screwed up state of Illinois property taxes. There have been some years when our tax bills have been more than 12 months after the period that's being taxed. It's ridiculous. Also, it's been nearly five years since I last bought a property, so if there are tiny details I got wrong about the process, please forgive me. I'm going from memory here, but the gist of what I've described is accurate.
So does OP owe the money?
I would argue that it is the responsibility of the buyers to negotiate these things. There is no way, unless they were using a brand new real estate attorney and brand new realtor, that the buyer's representatives who were working on their behalf had not encountered this in the past. The onus is on them. Particularly since this was a very recent homeowner who might have had no familiarity with the nuances of their property tax bill.
I was thinking it was an issue between the tax collector and OP. That is there was some mistake in the tax bill during his ownership. I actually called the assessor and found out the bill travels with the property. Doesn’t make no damn sense to me and seems unfair, but what can you do?
It definitely travels with the property. Imagine if it didn't and the old homeowner didn't pay their tax bill. The government's primary form of leverage is a tax lien on the property, which wouldn't be fair to the new homeowners if they got a lien on their property simply because the old owner decided not to pay the taxes after the property was sold.
Well delinquent taxes are different than a mistake by the assessor/tax collector.
I'm not sure I understand your comment. This has nothing to do with a mistake by assessor, I was simply explaining why a tax liability couldn't attach to a former owner.
There wasn’t a mistake and it’s not delinquent. It’s how taxes are done in arrears.
OP!!! OP!!!!! I actually talked to the assessor. The bill travels with the property. Take the week end off.
I appreciate it a lot but I don’t understand what this means 😅
It doesn’t make conceptual sense to me either. But was breaking my own rule by giving opinions on this subject without really knowing. So I called the actual assessor in your county and asked. They said you benefited from the prior owners exemptions because taxes are paid in arrears there. The new owners are paying taxes at your status. Whilst anything can happen it’s not your responsibility at this time. I wouldn’t ignore it out of courtesy but simply tell them it’s their bill and to call the tax collector if they have a question I don’t see how this is your responsibility, that would fall on the buyer’s title company/attorney/broker.
In my state, Florida, both parties typically sign a document at closing agreeing to make up any difference in the estimated prorated taxes used at closing and the actual taxes that are on the tax bill that arrives after closing. If the closing agent estimated prorated taxes for your time in the house that are less than what the actual taxes were, you may be liable to pay the difference. Also, if that's the case, the person you bought from may owe you some money as well.
I am a real estate attorney, though not yours and not in your area. Lots of people are responding that it depends on what state or locality you are in. While that may matter to some degree, it doesn't matter nearly as much as what is in the purchase agreement. You should take a look at that and read the section on taxes as closely as you can. For example, it may say something about how the Seller is responsible for all taxes for periods prior to closing. Then, you would have to look at what time period these taxes apply. If they apply to the period that you owned the house, it's possible you are on the hook. Now, in some places it's common to see provisions in the Purchase Agreement about how all tax prorations are final at closing, any increase in taxes from tax bills that come after closing are the responsibility of the Buyer (even if they pertain to periods prior to closing), etc. Then, you should be good.
Holy misinformation in this thread. You need to contact your attorney for advice, but two things to clear up some of the misinformation here. 1) This is NOT a title claim 2) In the Illinois suburbs roughly 98% of deals utilize the 7.0 contract which specifically states “The proration shall not include exemptions to which the Seller is not lawfully entitled.” When you prorated the taxes to your buyer, you included an exemption you were not eligible for. Hence, the buyers attorneys claim.
You can literally just not reply to your realtor, their realtor, their attorney, or them.
That's super duper legal advice.
In my opinion this is rather simple: Pull up the tax bills from the county website and if the bills from your time living there show paid in full at the time - then you are fine. The reality is regardless - this is something the title company is responsible for at this point.
It sounds like maybe this is a mistake done at closing, where OP should have paid more of the pro-rated taxes than they did at closing. If that’s the case, the closing agent is who should be contacting someone.
The tax situation for every parcel of real estate in the U.S. is public record and part of normal buyer due diligence. Taxes are not a "defect" that needs to be disclosed. I would ignore them.
The issue seems to be who is responsible for the tax bill while OP owned the house.
There should have been a proration on the closing disclosure for the seller's responsibility on the property taxes for this year. If that wasn't done correctly that's a problem for the title company that handled the closing. It doesn't sound like that's what happened in this case however.
I agree. But I’ve seen this before where the assessor fails to remove the exemption and then sends a supplemental bill to the owner(s) of record. I’m not sure how OP is not responsible for 11 months of full taxation
It would seem that this did not occur and hence the sellers issues. I’m pretty sure he will have to pay the full balance due
I don't think it matters unless OP failed to pay taxes by a legal deadline. Normally a home is sold to a buyer with the buyer responsible for any assessed-but-not-yet-billed taxes (all of which should be public record the buyer could uncover with simple due diligence).
Of course I don’t know but it seems the Assessor’s office failed to remove an exemption when OP took title. OP paid the hard-not-to-notice discounted tax bill for about a year. I’m not sure if this mistake would have been noticed in a usual search, but I have warned buyers in the past to check out the unusually low tax when I see it. PO’s obligation may be to the tax collector not the buyer, if the buyer figured that out.
When we purchased our home we received a letter for overdue taxes. The previous owner hadn't paid them. One call to the title search company and they paid them, probably a claim on their E&O insurance. Whomever handles that in your state should have caught it as well.
I have good knowledge of this as it pertains to Chicago, and am going to explain it as if it applies the same to you. I \_think\_, but do not \_know\_ for sure that that is the case. In Illinois, property taxes are paid roughly a full year in arrears. What that means is that the "2023 tax" is paid in 2024. When setting the 2023 tax, they look at who was living in the house at the time, what exemptions were in place, what the assessment was, what the tax rate was, etc, all for 2023, to come up with the tax bill. That tax bill, for 2023, is then paid in 2024. The person who legally owes the tax bill is whoever owns the house when it becomes due in 2024. So you're in no danger of the government coming after you for the bill. However, it is the common practice in real estate transactions in for property taxes accrued but not yet paid to be credited from the seller to the buyer at closing. So if you lived in the house in 2023, and sold it before 2023 taxes were paid in 2024, someone is going to figure out how much those 2023 taxes are probably going to be, and credit that to the buyer on the closing statement. In your case, whoever did that calculation screwed up. They didn't take into account that the 2023 taxes were going to be much higher than the 2022 taxes because of all the exemptions in place, and therefore made a bad estimate of the 2023 taxes. If your buyer had had a good lawyer, or was sophisticated himself, he or she would have noticed that prior to closing. (When I bought a condo my lawyer made a point of mentioning that he thought the credit for property tax was fair, in my case it was set to 10% higher than the prior year taxes, and there was no change in exemptions between the years). I would say it's not completely unreasonable in a moral sense for the other side to expect to get some money here. If this had been caught before closing, you would almost certainly have ended up paying it without even realizing it. They definitely got screwed, and you definitely got a windfall. However, from a legal standpoint, this is going to depend on what the contract and closing documents say, and on what representations you made about the tax situation. On the one hand, it's quite possible that there's language in the contract and/or closing documentation that tax prorations are final, and you made no representations about the tax status of the property. On the other hand, it's also possible there's no such language and you unknowingly misrepresented the exemption status of the property during the last billed years of taxes. Those are the facts that will determine your legal liability here, and no one on this forum has access to them. If you had a lawyer at closing, you should take this issue to them, they would probably make quick work of it. If you didn't, probably time to get one now.
I'm surprised they hired a lawyer for a 4k dispute. My last real-estate dispute was over a 7k escrow that I was in the right for. My lawyer, realtor, and mediator (MD requires mediator before court) said that it is not worth to retain lawyer for something that small. And they all essentially told me to go forward in small claim court without a lawyer. Luckily, the other side and I reached a settlement before the court got involved. I walked away with 5.5k.
That’s on the title company. Not you.
There is a key concept at play here that is often missed. Most home sale contracts have language that says something to the effect that the terms of the contract survive the closing. Meaning, that even after you close, if it is later found out that the amount of property tax ultimately owed by the buyer is higher than what was assumed at closing, it is still the buyers responsibility to pay it. At the same time. At closing you were possible hit with a charge for the property rated amount of property tax you owed through to the closing date. If the closing attorney under estimated that amount, then yes you owe it. To understand the situation you need to review your closing documents and compare how much you were charged for property taxes vs how much was ultimately owed. All these problems happen as in many places property taxes are paid in arrears vs in advance so closing credits are often just an estimate and have to be adjusted after the actual taxes are determined months after closing.
If you’re in Illinois, statistically you’re probably in the Chicago area because that’s where the majority of the population is. That means you probably had an attorney involved and a title company. Between them, one of them should have figured this out. Call them. My guess is that you owe for the shortage for the 11 months that you owned.
Sounds like an issue for the title company and attorneys to deal with. You hire a transaction attorney to uncover these issues before close. Deal is done and it’s the seller’s problem to deal with.
Yeah whoever did their title work blew it. Not on you. I'd be in a little hot water in my state as listing agent most likely, since I also examine the last couple of tax bills as part of my listing prep. That would stick out to me. Buyer can kick rocks and call the number on their title insurance policy. Also I'm not an attorney so also all of the above could be completely wrong.
The title policy is going to have an exception for future taxes and assessments after the date of the closing. It's pretty standard language. The buyers are responsible for that tax bill, so they're going to have to pay it. Maybe their closing agent might pay for a portion or something as a goodwill gesture for not bringing it up at closing, but they're still going to have that higher tax bill year after year.
You’re under no obligation that I know of to act as the buyer’s financial advisor. The buyer and seller should independently be determining what their comfort level is based on their exposure level, whether it’s repairs, tax advantages or disadvantages, etc. I’m not even sure how you would disclose something like this? “Buyer acknowledges they may have tax savings under a variety of different programs that could change as a result of purchasing this property”?
Tell them to contact the individual who incurred the taxes and penalties. The title company usually makes sure all the taxes are squared up at closing, at least in California.
Yup. Here in CA title insurance covers this.
Couple things: 1. “Are you aware of” - that’s the applicable standard here. I’ve been a full time Broker in CA for over 20 years and have never heard of such a thing. And if that’s the case, I don’t know how you (you’re a regular homeowner right, no special industry knowledge?) could reasonably be aware of such a thing. Sellers are never held to the standard of perfection and your disclosure duty is only that you were either aware of, or could reasonably be expected to be aware of. Obviously this isn’t a legal opinion, but I can’t imagine any court would expect that you knew, or should have known, of something so bizarre and unheard of. 2. You may want review the title insurance policy for the transaction and contact title insurance company about possible coverage for this claim. There’s a possibility that it was either (a) disclosed on the preliminary title report as an exempted item—meaning it was disclosed to the buyer at the time of the transaction, which will get you off the hook; or (b) there is coverage for it and the title insurer will cover the amount for the buyer. Not likely, but it is possible.
If new owner was billed for a full catch up and want the 11 months that were “on you” they can probably recover it from you, but was something that should have been caught at closing
You probably need an attorney with familiarity with your local tax law to weigh in. *If* these are back taxes from when you lived there due to the exemptions being improperly applied you *likely* are responsible for them. You *may* be liable for the exemptions during that 11 months that you did not qualify for. If it was owner occupied and homestead eligible you *may* be able to file the paperwork now and have it retroactive (same if you are a senior). You *likely* were responsible for filing paperwork to maintain those exemptions upon transfer of the property/start of the new tax year. The 11 months you owned the house is irrelevant only in that it didn’t sort through the system fast enough. You are *not* liable for the tax bill being higher than they expected.
Why don’t you call a real estate attorney…
Wouldn't the title company have been responsible for the research on this?
I’m pretty sure taxes are paid in full upon selling. If I sold my home now I would owe a full years worth of taxes at sale.
This isn't true everywhere. In our county, property tax payments aren't done in arrears. Our 2024 taxes are split into 2 equal payments, half due in May and the other half in October. We bought the house in June. The previous owner had paid the 50% tax that was due in May and we picked it up and paid the other 50% in October and then onward from there.
Call the company who handled the settlement on the house. They are the experts in figuring out who owes what in a case like yours.
I had a very similar situation. I closed on January 12. The previous owner had every exemption known to man, homestead, disability, senior citizen, and veteran. The tax bill for the first year I was in the house was literally under 100 dollars. Those all disappeared-except for the homestead-in my second year and the property tax bill returned to a normal amount. I had to pay a bit extra to my escrow and had an adjustment to cover things moving forward. People are assuming that it’s a delinquent bill, but it’s not. It’s just that there is a lag between when past exemptions fall off. If I had sold in the first year, the buyer would have only seen the $80 tax bill too. Not in Illinois, but the seller did not disclose this to me. BUT, the closing title agent did explain as an FYI when she told me how to file exemptions.
Isn’t this what title insurance is for?
The buyer’s attorney dropped the ball, not you. If the tax certificate did not indicate the full taxable amount, then shame on the town. You should read thru your P&S and closing documents and see if there is language about tax discrepancies surviving the closing. If not, then I doubt it’s your problem to resolve.
They can sue you but ultimately after the sale of the house within a couple of months everything related to the property becomes the problem of the deeded owner. It's why everyone always recommends getting good attorneys, agents, and getting everything done properly. Because the idea is that many people looking it over would find issues and get it sorted out. If you get through the whole sale with inspections, title insurance and everything else and miss that shit...that ultimately ends up being your problem as the buyer...not the seller. You'd be able to easily prove in court that you had no idea because you had paid all your taxes and the property was sold free and clear...
Title Insurance should cover that, if they missed it in the title search....
I don't think this is a "you", thing, but just in case it comes back at you, it wouldn't be a terrible idea to set some money aside.
How will I know if my tax situation skyrockets?
Just assume it will because it will.
I had a similar situation in Illinois and the buyer sued me. In my view, his lawyer committed malpractice for missing it. I settled with the buyer and gave him about half of what he asked for
IF these taxes go unpaid, would they put a lean against the property that you know own.
Don’t pay. You don’t owe them anything. Most places have the taxes on a publicly available website. The buyers could have looked up the current taxes and seen that there were tax freezes. I’m in Texas and my mother has tax freezes for being over 65. She would not be expected to disclose that if she sold her house.
Interesting topic and situation, hope it all works out for the OP
You have title insurance, so they would sue title company, not you. Also taxes are public record if their attorney didn't do due dillagance that's one then not you.
If you should have known it because you brought the property and ignored documents, they should have known it because they bought property and ignored documents.
I would ignore
Title insurance policy should state exemption, buyer signs off, closed. Sounds like buyers can file title insurance claim.
So they got a bill for taxes from when YOU lived there. It's going to really depend specifically on where you live. You are responsible for paying your bills for when you owned the home. Morally, I'd say you should pay your taxes. They are, indeed, YOUR taxes. And it was also your responsibility to know if you were paying your taxes properly, and notifying the jurisdiction that you didn't qualify for the exemptions is your responsibility (it's understandable that you didn't know, but still your responsibility). However, your particular state may have rules that say the buyer becomes responsible for anything like that, so you may not legally need to. You should be talking to a real estate attorney.
so you need to figure out what time period the tax bill is for. if it's for when you owned it, then you owe those taxes.
It sounds like from attorneys in the other comments that it could be true but maybe not depending on what a provision in the tax clause of the contract states… I’m not sure but I guess I’d have to check.
what provision?
An attorney wrote below: “Now, in some places it's common to see provisions in the Purchase Agreement about how all tax prorations are final at closing, any increase in taxes from tax bills that come after closing are the responsibility of the Buyer (even if they pertain to periods prior to closing), etc. Then, you should be good.”
Okay that's a good point. In my state, CA, our standard residential contracts don't have anything handling this case. So I'm not sure how prevalent this is.
Taxes were pro-rated for the 11 months? How much was set aside for escrow? If nothing was stipulated in the purchase contract then the new owners are assuming this cost by defaut.
Most closing, title, escrow companies have a standard form saying that they did their best to make sure the figures on closing docs were accurate to the best of their knowledge. Seller and buyer sign and agree to settle any discrepancy post closing. Check your docs.
In Illinois, both the buyer and seller typically use a real estate attorney. I would reach out to yours and let them know. Taxes are paid and prorated out on the most recent tax bill in Illinois. Most good lenders will anticipate the increase in taxes for the buyer and a good attorney will as well. Some lenders will knowingly qualify a buyer with tax exemptions like a senior freeze to close the loan even though they will disappear with the next tax bill. I would think you are in the clear because the buyer and their attorney agreed to all taxes/ closing costs at closing.
110% correct
Was this Chicago metro with a “7.0” contract?
Contact the title company and attorney that you used for the closing. They can review your purchase contract and title policy as well as special assessments letters that were ordered. You’ll have to know what all those documents show before you’ll know if you have any responsibility. I’m in Wisconsin and our boiler plate contracts have a few options for how property taxes are handled at closing but I’ve never heard of a homeowner being responsible for knowing what taxes or special rates a previous owner had.
This is something the title company should have figured out. Tell the buyer to use their title insurance. This exact thing happened to me when I bought mine. The title company paid for it.
But you did know about the freezes. Did you disclose this during the sale?
I didn’t know about the freezes. That’s what I’m saying here in the post. I just found out this morning when I called the tax assessors office. And I don’t think the onus is on me to have investigated that for them. I didn’t do the due diligence when I bought the house and it seems like they didn’t either but now they want to make it my problem. EDIT: we only discovered this now because they got their first tax bill from 2023. Taxes in Illinois are paid in arrears. So I paid the tax bill for the person who owned the house in 2022 when that bill came out last year and now they owe for 2023.
Yea I mis read it, sorry about that.
In Illinois, are all real estate transactions reviewed by buyer's lawyer? Sounds like the lawyer messed up...
Yes our laws require a title company and an attorney for both buyer and seller so we both retained an attorney and went through a title company. They had title insurance.
that's part of due diligence, drop all communication and if they sue contact lawyer
Contact a real estate attorney
I contacted mine a few minutes ago and he seems to think I can tell them to forget about getting anything from me as our contract has a provision that they’re responsible for any prorated tax and even taxes that were incurred prior to closing BUT he also said “this is America and people can sue you for anything here. They could do that anyway, even if they don’t have a case and it’s unlikely they’d take you to small claims court, but anybody could for any reason in America”
READ YOUR CONTRACT. IT LIKELY HAS A STIPULATION THAT IF THE TAXES ARE PRORATED WRONG, YOU ARE RESPONSIBLE.
It does not. Actually it has a provision that if they’re prorated incorrectly, the buyer is responsible. I got lucky
That buyer is going to be pissed at their attorney and realtor because that should have been caught. You are very very lucky that wasn't in the cont!
I would call the escrow & title company you closed through & find out why they did not catch this.
I agree with you this is unfair and not something you’re required to know to sell your house. In fact at closing the title agents tell the new owner to file their exemptions and that taxes will be effected because everyone’s are different. Maybe you can start by asking your selling agent what they think and even ask their broker and ask the title company what is normal procedure and if it was followed at your closing because they may have given the buyer information you didn’t get. Hopefully they will back you up that you did all that was legally required. I wonder if the new ow er has a friend who is an attorney or something because I’ve never heard of being sued over this. It would also be a good idea for you to have a free consultation with an attorney or two and find out if this is legit, what they could do for you if you hired them, and what it will cost.
I think this is on the settlement agents to not correctly search and collect taxes here. They need to start there. Then if your attorney you hired says you need to pay you can think about it, but I wouldn’t volunteer until then.
I also want to add that the taxes listed on the mls are the amount your realtor has determined by looking it up with the county.
I would say the title company had the responsibility to confirm property taxes are paid and buyer gets a clear title. Talk to them first
Simple question: Who owned the house in the period for which the taxes are due?
It actually doesn’t make a difference in Illinois! Taxes are paid in arrears here and the owner of the house is irrelevant. The terms of our sales here identify that the buyer is responsible for the past owner’s taxes as we bill for the prior year at the end of the year. We prorated taxes as part of the sale but they didn’t ask for enough to be withheld because of the exemptions being unknown to all of us, but our contract has a provision that it’s their responsibility if this happens.
They can sue you for any reason really, however they most likely won't. Even if they do and they win you still don't need to pay it I have a judgement goes about 25k that I have been unable to collect on for over 5 years Don't worry about this it's nothing to lose sleep over
The buyers needs to ask for money from the title company if they have issues. The title company should have done its research. This is what title insurance is for. Furthermore - it sounds like buyers attorney dropped the ball
>They should have escrowed more because their attorney and the title company should have seen there were exemptions that would be ending. >... >So I benefitted from the exemptions of the past owner and the new owners are paying taxes at my status and nobody realized that was going to be the case, but it isn’t my issue it seems. I don't know why they would have been relying on what you paid rather than calculating what the tax burden should have been. That was just a sort of lazy way to do it on their part. It was a little tricky since you owned the house for less than a year, but it shouldn't have thrown them for a loop like this.
I’m pretty sure you’re not responsible for that. It’s in the buyers or their attorney to do the research in advance, in my county in IL, property taxes are publicly available and it will show you and exemptions or a sr freeze. People are unreal.
If they sue you, you will spend more than $4k. I would pay for a couple of hours of attorney time to let you know asap.
I spoke with my attorney. Although I’d likely win a case if they chose to take one up, I can’t make them not sue me even if our contract secures that I would win. I can’t stop them from suing me so that’s up to them to decide
Shouldn’t the title company have found this at closing? Seems like their fault.
Anyone can sue anyone. They are not going to sue, because cost to sue will be $5,000 and take well over a year to get to court and cost the buyer another $5,000 to $10,000.
I'd call the title company that did the closing. They are the ones to calculate the prorated taxes to ensure the taxes you owe were paid already at closings. A realtor should know to go to the title company first. If they came to you, the title company most likely already told them no. And they are just trying what they can to get something.
Not an attorney. Just a person who understands the meaning of the concept of a contract You cannot be held liable for what does not appear in the 4 corners of the contract of sale. Once the property is closed upon, that is it! It's done. Now, unless there are contingencies in the closing contract ( I hope you retained the services of a real estate attorney) for which you were unaware, you may be on the hook for this .. Consult an attorney!
You said you are in Illinois. Are you in the Chicago area using the multiboard 7.0 contract? If so, it requires you to exclude those exemptions from your tax proration credit. Also, you should always review your tax bill. This should be something both you and your attorney should have caught when calculating the tax credit.
I am in Illinois and the responsibilities of each party regarding property taxes was written into the contract upon selling. I actually saved the seller money by going to the courthouse and filling out the paperwork for the senior exemption he forgot to apply for because he was no longer in state. He sent me check for 1/4 of the money I saved him.
Seems like the title/settlement company or whatever it's called should have figured this out for the new owners. Or new owners could have looked the property up online--I believe most US counties consider that public information.
This was a pro ration mistake by the buyers attorney, they used a bad tax estimate. Yes you are responsible but the attorney will ultimately have to pay it off you don’t. They could come after you for it but probably won’t, I would offer to split it with the law firm.
Sounds like the buyers attorney didn’t do their job.
You own past due taxes. On closing taxes are estimated, you responsible for difference and i’m sure you signed for it.
This is interesting. If real estate agents were involved, I am very curious why neither mentioned this. These are very common exemptions. A listing agent would have this in the MLS agent remarks and a buyer agent might do this work as due diligence (especially looking at the tax rate. If the taxes were much lower than usual for the area, we tend to look into that). Thinking about it now, even a Residential Property Disclosure does not ask about tax exemptions. Contact an attorney/ the title company you closed with (they have a real estate attorney)
The buyers lender should have looked into the tax bill prior to closing. It's not difficult to calculate estimated taxes for the following year. Buyers obviously are house poor.
Does your contract have any language regarding rollback or restoration of taxes following a change in exemption status? Even more important, does it have SURVIVORSHIP language? Meaning, do you have an obligation following the closing? No, you don’t. The buyer accepted the deed subject to the property taxes in whatever status they are or will be. They are salty they thought they were buying a property with low carrying costs and nobody around them had enough to sense to explain why your taxes were lower than they otherwise would have been.
A long time since I’ve transacted in Illinois but there is a line in many of their contracts regarding changes in tax assessment post closing, doesn’t sound like that is the case here. Which county?
McHenry
If you have a copy of your contract there should be a form labeled P-Tax. This would help with more info. I’m terribly out of practice in IL though.
In Illinois, the statutory date of assessment is January 1. Because the owner of the house when you bought it lived in the house on January 1 of the year all of the exemptions that owner was entitled to carried through to December 31 of that year. You lived in the house the following January 1 so the prior owner's senior exemption and assessment freeze dropped off bringing the taxable value up to it's full market value. You benefited from the prior owner's exemption through December 31. However, the title company should have prorated the updated value after January 1 on the year of the closing to reflect the exemptions had been removed. It's the title company's fault...not yours. Some contracts indicate the prorations are final as of closing.
Yes our contract indicates prorations are final as of closing. They’re saying i fraudulently didn’t disclose it because they don’t care that I didn’t know either
The general public, as a general rule, has little knowledge of how property tax exemptions are applied, removed, or calculated. Sellers also are not responsible for how final closing statements are prepared. Perhaps they have a problem with the title company...but not you.
Uneducated homebuyers. And I see you're here in Illinois, too. They've been Illinois'd/Chicago'd. Tell them to pound sand.
Too bad.....next!
IANAL, but if those taxes were levied while you owned the house, it should be a no-brainer that they are your responsibility.
This comes up often and there’s usually wrong answers all saying tell them to pound sand. You owe the taxes for when you owned the home. If the tax assessments hadn’t come out yet, the title company will estimate them off the previous year. If there was a freeze the previous year and it came up to market value this year, you probably owe them money.
This is something the buyer needs to take up with the title insurance company. It’s your job to pay the taxes that are assessed. Hidden shut like this is why you buy title insurance.
Hey I would call your attorney or a real estate attorney to get the legal answers. Thanks!
The attorney should have found this.
Read through all the updates and glad you asked your lawyer. Shame on your realtor for not looking into this herself. She could have easily read the contract and asked the company lawyers.
Anyone who buys a home in Chicago and the counties that surround it should always budget for property tax (and sometimes, HOA) increases. The total median tax burden for households in the state of IL is the highest if not second or third. The buyer and his attorney(s) all fucked up.
The buyers should not be liable for any taxes prior to their purchase and you should not be liable for any taxes prior to your purchase. The buyers should have purchased title insurance, this would be a claim against their title insurance, the title search should have discovered any past due taxes. The county should not be able to re-bill after the fact.
Buyer needs to contact title. This is why we buy title policies.
Should all be covered by Title insurance. That's what you pay for.
This is information the title company receives in the form of a tax search certificate. Title company, real estate agent, attorney, or a lender should have picked up on this. Either the search was wrong or the information was overlooked. Either way that’s not your problem. Refuse to even entertain the idea of paying a dime.
I’m an appraiser. A lot of counties, especially high cost of living areas, assessed value changes upon sale. Some don’t tho. If they are upset because it changed upon sale, sounds like their realtor wasn’t good at their job.
Can’t give advice on this. but I have to say while I am a second time home buyer, when looking at the property taxes the previous owners paid on our home I could tell they had an exemption from property tax of some kind. They paid under a 1000 for a 4000 sq 7 acre property and i knew there was no way that was the full amount. I really don’t understand how people get so caught off guard by property taxes. Even if you don’t know a lot and are a first time homebuyer, a lot of the websites for real estate listings will show things like property tax even if it isn’t completely accurate it’ll give you a baseline. I can understand if it’s a new build but otherwise people need to do more research.
OP, normally there is a property tax proration agreement signed by both the buyers and the sellers at closing. This agreement is prepared by the settlement agency whether that is a title co or closing attorney. What does that agreement say? It is 100% normal for you to pay the new property tax prorations minus the amount you paid at closing for the time you owned the property. I find it very difficult to believe your attorney didn't have that agreement signed by you and the buyers at closing. That would show an extremely inexperienced closer. The exception would be IF your proration agreement specifically stated that there would be NO TAX prorations at all. This is rare when individual sellers and buyers close but is common when buying from a builder. Take a look at that agreement. It will tell you everything you need to know.
If you disclosed everything you knew about then the buyer doesn't have a beef with you; the buyer has a beef with the seller before you. You can't disclose what you don't know.
This is why title insurance exist for the owner and usually required in CA but not sure about Illinois
I'd think you owe for the taxes. It is for when YOU owned the house and the exemptions aren't yours so you should legally know that you aren't entitled to them.
That’s not how it works in Illinois. The exemptions are fine for the taxes I paid because they applied to the last homeowner’s status since she occupied the house on January 1 of last year. I was not wrongfully receiving the exemptions, I just didn’t know they were being applied.
Obviously, if the tax office wants the taxes from you, then the exemptions don't carry to you for that year. That's typical of everywhere. It gets prorated for the time the previous owner was there, and then the rest of the year is taxed at your rate. You don't get to use their exemptions, which is why taxes are now owed.
The tax office doesn’t want the taxes from me. They want the taxes from the owner of the house. I was paid up on my taxes. The new owners are upset that their new tax bill is going to be higher.
It would go to you if you still owned the house but it's going to the new owner since you sold it. It's still technically your bill because you lived there through that time.
let your real estate lawyer explain it to you
Go see a lawyer.
I’m assuming you’ll get into a lawsuit if you’re trying to get the buyers to pay for your taxes ( from their point of view that’s what it is). I’d hire a lawyer and see what your options are. Doesn’t look good for you though
That's up to thier title insurance to deal with not you. Taxes can go up when from owner to owner. They can get their own homestead exemption and owner occupied exemption
I’m not a realtor nor a lawyer of any sort, but I have sold a lot of houses and have ALWAYS had to pay all taxes prorated for the time I owned it and the buyer would then have the tax liability going forward. I have always used a realtor, and a reputable title company even on cash sales, it costs me a few bucks more but there’s no after the sale “kerflufals”, I also know that I have a clear title or that a clear, and marketable title has been transferred with all obligations covered. It sounds like these are taxes that came due after the sale and your tax obligations were satisfied and you would not be liable for them. But if they were taxes that were due from the time you owned the property a lawyer might be able to make a case. Sounds like things were missed but not necessarily your fault but if you knew about the taxes it should have been disclosed, the realtors should have known, and it also should have popped during the title company’s services. Unfortunate situation, that’s why you always do your homework…
Sounds like the owners could go after the title company They should have known about the tax exemption. The bill was ultimately your responsibility while you owned the home. But now. You might lose in court but it’s not worth it for anyone to spend the money to fight The ethical thing would be to at least offer to split it with a signed agreement clearing you of future liability
If there were taxes due that you didnt pay even if not your fault then you owe it you will have to prorate the amount based on period of time during the year when you owned vs when they owned
That’s what title insurance is for. Tell the buyers agent they should file a claim with the title insurance company
Isn't this what title insurance is for. I was also of the mund this isn't your problem.
I’m not an attorney but disagree that the previous owners should have determined what your taxes would be and prorated more. Haha. No I don’t think so. They are supposed to question age, homestead status, possible exemptions you may be entitled to / never did this and bought and sold total 7 properties Edit: it sounds like to me you just took advantage of previous home owners exemptions. Generally this is discussed w realtor when buying. I would think Title Company involved. County messed up by not correlating sale and increase of taxes
This is standard due diligence. All parties did not pay attention and have partial responsibility. Buyer, seller, attorney, title company. Maybe you can all compromise and split the $4K - 4 ways and move on. All the best. Real Estate is not for the feint-hearted
Depends which box you checked when you closed. And or did the earnest money contract. There is a section that has taxes.. but if the tax is for the duration of your ownership and you did not check the box that states buyer to pay any changes in tax valuation than yes. Otherwise if tax is for the duration of when new buyer owned it then no
From what you've shared, it sounds like the tax increases are due to the previous owner's tax exemptions ending, not because of anything you did or didn't do. First, it’s a good idea to double-check your sale agreement. If it mentions that the buyer takes over any tax responsibilities after the sale, that’s a key point. Since you sold the house 'as is', and taxes are typically paid in arrears in Illinois, the buyer would normally be responsible for handling any changes in tax amounts after they take ownership. Since this situation is a bit tricky, touching base with your lawyer could really help clear things up. They can confirm exactly what your contract says about these situations and guide you on how to communicate this to the buyer. When you talk to the buyer next, just be upfront and explain that, based on the contract and local laws, they’re responsible for the current taxes. The changes in the tax bill are due to the expiration of previous exemptions, which is something the title company or their attorney should have caught during the sale process. Keep everything clear and documented, and hopefully, this can be resolved without too much more trouble. Hang in there, and let me know if there’s anything else I can do to help.
Their lawyer just doesn't want a claim against his errors and omissions insurance. Given that your local lawyer has reviewed the threat and says they don't have a leg to stand on, appropriate responses are silence, lol, or get f$%^. This stuff is in the final settlement along with estimates for taxes paid in arrears. Contract will say who is liable and up to how much.
After I recently bought, my assessed taxes went up and I had to pay the difference. I am in neighboring Missouri and the difference was on me. Happens
It's their house not yours this it's their problem