Home Buying in Los Angeles>Question Details

Greenhouse23, Home Buyer in Los Angeles, CA

We are buying a house and found out that the seller owes back property taxes. Will we have to pay them if we want to purchase the house?

Asked by Greenhouse23, Los Angeles, CA Tue Jun 7, 2011

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The preliminary title report will show all outstanding liens. Usually paid thru escrow from sellers proceeds. However, REO and Short Sales could prove a problem for the buyer and should be negotiated in the offer.


David Cooper Las Vegas Foreclosure Specialist for 35 years buying below market.. For your Freee List
see website or Call +1-7024997037
2 votes Thank Flag Link Thu Jun 16, 2011
Hi Greenhouse,

The seller would generally be responsible to pay the past due property taxes at closing and bring the taxes current. It all comes down to what the parties have agreed to in the contract, so make sure that your contract states that the seller is responsible for these taxes. The standard California Association of Realtors Residential Purchase Agreement addresses this in section 17 and states that taxes shall be paid current and prorated between buyer and seller unless otherwise agreed to in writing. Good luck with your purchase!

John Barry
DRE #01856079
Coldwell Banker Residential Brokerage
Cell: 323-810-7976
Email: john.barry@coldwellbanker.com
Facebook: http://www.facebook.com/RealtorJB
Twitter: @RealtorJB
2 votes Thank Flag Link Tue Jun 7, 2011
Typically it is the seller’s position to pay the taxes. However, if this is a short sale or an REO, the bank may require you to pay them. Without more information, it's hard to give you a definite answer. As always, there is room for negotiation. Make sure your agent is in constant communication with the selling side, especially if it involves a bank or asset manager.

Congrats on finding a home,

Renee' Kische
Keller Williams Hollywood Hills
1 vote Thank Flag Link Wed Jun 8, 2011
Buyer's don't inherit back taxes unless you are buying at a foreclosure auction or something similar where clear title is not guaranteed and you are accepting the property with all the outstanding liens.

In a typical transaction it's the seller's responsibility. The back taxes will be paid out of the seller's proceeds during escrow so that clear title can be passed to the buyer. This is also true for a short sale, the short sale lender will usually pay the back taxes.

Be sure to ask your agent to confirm the back taxes are being paid out of escrow by the seller, they can get this information from the escrow officer.

Good Luck and congratulations on the purchase of your new home.
Monica Hernandez
Bankers Realty Exclusive, Inc
1 vote Thank Flag Link Wed Jun 8, 2011
Green --

The seller should clear all liens. If it was a short sale or REO the seller (and or lender) should have cleared these liens. If you have purchased title insurance, these liens must be cleared before transferring title. Seller may be paying them out of escrow. Have your agent follow up. You should not have to pay. If seller can not pay, then reduce the price accordingly and or take a credit to pay. Your agent should be able to advise you best.

CJ
Web Reference: http://www.TalkToCJ.com
1 vote Thank Flag Link Tue Jun 7, 2011
After paying taxes on a tax sale can previous owner come back and take possesion of the house even after we sign a purchase agreement??
0 votes Thank Flag Link Tue Sep 17, 2013
i am wanting to buy a house that the woman owes back taxes and she wants me to pay her 5000 for back tax and money to her private sell. If she can't find the deed then after i pay with a private sell will i own it and can i mail out for a new deed in my name???
0 votes Thank Flag Link Tue Sep 17, 2013
Chances of you paying the back taxes in this market are high but how much is most likely negotiable. There are many scenarios, is the property bank owned? is it a short sale? is it a standard sale? Depending on the scenario will determine how much if any will need to be paid.
0 votes Thank Flag Link Sun Jul 10, 2011
Oh... and though it is negotiable, it's generally the Seller who does pay any outstanding debt, in my experience.
0 votes Thank Flag Link Fri Jul 1, 2011
Hello Greenhouse23,

The Title Company will confirm if taxes are owed. It is not my or any other agent's, or non-agent's, place to tell you yes or no. You have options here; it is negotiable.

The Seller can not force you to pay the taxes, and vice versa; but, it does need to be paid by someone prior to transfer of title. To make clear: I'm not a legal advisor, and this may actually vary from state-to-state.


Consider: if it's not paid prior to transfer of title... title will not transfer.


Is it a short sale? If yes, perhaps the seller can't pay... and perhaps their bank is or is not willing to pay; attempt to have the Seller or their bank pay. If they say no, then it will be up to YOU to decide if you are willing to pay it.


Is it a banked owned REO? I've never seen a bank not pay prior years taxes and make current.... but, if you're getting it for a GREAT EXTRAORDINARY price, perhaps they may ask you to pay it; as long as it's clear and in writing, it's all good.


Is it a traditional sale? I think you get the gist... it’s negotiable.


Cheers! Oh, great question btw.
0 votes Thank Flag Link Fri Jul 1, 2011
Don't pay them. Tell the seller NO. If there is equity, the taxes will be paid before escrow closes. If there is no equity, make the seller pay them before you close

DAVID COOPER Foreclosure Specialist in Las Vegas with 35 years Investing Experience. For a Free list of bargain homes, click website or Call +1-702-355-8807
0 votes Thank Flag Link Thu Jun 30, 2011
Great question. Another agent mentioned reviewing the Prelim Title. Great first step. The Title should expose if there are back taxes owed. It should come out of the seller's equity, in escrow, before close of escrow; however, ifthe property is REO or Short Sale the banks may not want to pay the back taxes and ask teh buying side to contribute before the close of escrow. I see this more with short sales than I do with REOs. Make sure to keep this part of the conversation current when talking ot your agent.

Best,

Renee' Kische
0 votes Thank Flag Link Thu Jun 30, 2011
Greenhouse23,
Great Question! Review your contact to purchase and any addendum attached for guidance. If you don't find the answer there contact your attorney for the answer. Normally the seller is required to pay all back taxes and supply you with clear title at closing, but not in all cases. Previous answers are correct about HOA's, Foreclosures and Short Sales.

All the best,
Gary Geer
http://www.GaryGeer.com
0 votes Thank Flag Link Thu Jun 30, 2011
It's always a negotiation. In a retail sale, have the taxes paid through escrow from the seller proceeds. If there are no proceeds, try a short sale, and ask the lender to pay.
Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) 818.564.6591
(C) 310-422-4288
http://www.thebremnergroup.com
Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
I want you to know that I appreciate any referrals from friends and associates who may be in the market to buy or sell real estate. You can count on me giving them the same high-quality service I provide to all of my clients.
0 votes Thank Flag Link Thu Jun 16, 2011
Hi Greenhouse,

Good answers below. I just wanted to add that if there's an HOA you will want to check asap as to whether they are behind there or not. More often than not, if a seller is behind in property taxes they are also behind on the HOA dues. And if a short sale, in my experience the current bank is more likely to approve payment of back taxes over payment of HOA dues.

Best of luck!
Tara

Tara Steinke
Broker / Owner
Solant Real Estate Advisors
619-384-6014
0 votes Thank Flag Link Thu Jun 9, 2011
Hi Greenhouse:

In most cases, the seller or bank will be required to bring the property taxes current. If you do not want the additional financial burden, insist that the seller or bank/mortgage holder pay them current through escrow. You will be required to pay your prorated portion of the property taxes.

Good luck!

All the best,

Kat Becker, Agent
Prudential California Realty
katbecker@prula.com
0 votes Thank Flag Link Wed Jun 8, 2011
Taxes must always be paid, regardless. The question is, who is responsible for paying them? Depends on the transaction. Real Estate Tax liens are always paid first before any other lien. If it is an upset tax sale, then yes, you pay. If it is a judicial tax sale, then they should have been divested. If it is a foreclosure action, then again, they should have been paid by the bank. Now, if it just a regular buy/sell situation then the owner at the time of the taxing should have paid them. If they do not, and you buy the house, guess what, it passes on to you. You can try and go after the prior owner, but the tax attaches to the home, not the owner. That is why you should always have a title search done to find out if there are any outstanding liens and take care of them before you sign on the dotted line. If you are using a title company, then they would order tax certifications and discover the tax issue. They then would work on resolving the problem. My advice is -do not settle on the house until the tax issue is resolved.
0 votes Thank Flag Link Wed Jun 8, 2011
It is the previous owners responsibility!
0 votes Thank Flag Link Wed Jun 8, 2011
If you are financing your lender will require them to be paid so it depends on your contract and/or how you negotiate it as to whether Seller or Buyer pays. If you're paying all cash presumably you could leave them but they won't go away so it seems wise to have them cleared before they accue more interest and penalties.
0 votes Thank Flag Link Tue Jun 7, 2011
Hello Greenhouse23.

My colleagues have covered your questions very well. In a majority of sales it is the owner's responsibility to bring any back taxes current before title records.

I would encourage you to have your realtor double check that this has been discovered/disclosed from the Seller's side. If it is a short sale, like Tom G. said, make sure it is on the HUD1 for lender approval.

Is the home a green home or do you plan on making it a green home? Just curious.

With Gratitude,
Ryan Ole Hass

The Red Door Group L.A.
Keller Williams Larchmont
http://www.UnlockTheRedDoor.com
ryan@rdgla.com
323.762.2575
dre lic# 01417826
Web Reference: http://www.rdgla.com
0 votes Thank Flag Link Tue Jun 7, 2011
For reference, see page 5 item 17 of the purchase contract.

If it is a standard sale, to be safe, I would make sure there are enough seller proceeds to cover the back taxes.

If it is a short sale, the amount will need to be on the HUD1 for seller's lender approval.

Congratulations on your new purchase.

Tom Goeders, Realtor, SRES
Keller Williams Realty
http://www.TomGoeders.com
tomgoeders@kw.com
(818) 378-7602

License # 01290589
0 votes Thank Flag Link Tue Jun 7, 2011
You shouldn't have to, unless it's been stipulated that you would be responsible for them. In a typical sale, the seller would be responsible for clearing those items before the property can be transferred to you. That is also the same in the case of a bank-owned property. However, if you're buying a short sale and there's just not enough money to go around, buyers have previously been asked to pay for any outstanding back taxes, other liens, just to be able to move forward. If that's not the case, you should be safe.
0 votes Thank Flag Link Tue Jun 7, 2011
As the others have stated, this should NOT be a cost to you. Please review the HUD1 statement to make sure the delinquent taxes are being listed at a sellers cost and not a buyers cost. Typically, in an equity sale, the taxes will be paid from the sellers profits. In an REO, the bank pays them and in a short sale, once again, it is paid by the sellers and if they sellers don't pay them, the short sale lender will. The buyer should NEVER have to pay a sellers delinquent taxes.
0 votes Thank Flag Link Tue Jun 7, 2011
In order for you to get clean title, all liens on the title must be paid. If this is a standard sale, then the taxes will be paid through escrow from the sellers proceeds. You are not paying this. If it is a short sale, then the listing agent should have that item listed as part of the sellers costs for the shortsale, again not a cost to you if this is approved by the short sale lender. Many times, the sellers mortgage company picks up the delinquent taxes automatically... just call the company you are in escrow with and make sure this is a sellers cost. Good luck.
0 votes Thank Flag Link Tue Jun 7, 2011
That would be the responsibility of the seller unless otherwise agreed to in advance. If the seller doesn't have the money to pay it then you would have to pay it if you want to buy the house.
0 votes Thank Flag Link Tue Jun 7, 2011
Somebody will have to pay them current before escrow closes. Your escrow company should deduct the taxes from the net dollar ammount going to the seller before the title is transferred

David Cooper Foreclosure and Bank Owned REO Investor in Las Vegas for 35 Years. For your free list
Call +1-7024997037 or check website
0 votes Thank Flag Link Tue Jun 7, 2011
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