Home Buying in Indianapolis>Question Details

Indydomer, Home Buyer in Indianapolis, IN

We have agreed to buy a house in the 46236 area code at $315,900. The owners have long since moved out and are paying $6,239 in prop taxes.

Asked by Indydomer, Indianapolis, IN Thu Jan 17, 2013

I see that we are inheriting a monthly property tax of $519.92 to our monthly mortgage. When we file our homestead exemption, when can we expect it to go into effect? It is now January 17, 2013. We will be closing in the middle of February. Thank you.

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The exemption will apply to this year, but we pay a year in arrears in Indiana and therefore your monthly payment won't go down until the tax bills come out next year. You will most likely have a year of payments at the higher rate, but your agent should have been able to explain this to you already.... And as long as you are using regular purchase agreement contracts you should be getting a credit at closing that makes sure you aren't acquiring their burden since you get the money upfront.
0 votes Thank Flag Link Sun Mar 3, 2013
Best next action is to ask a local Real Estate Broker by clicking "Find a Pro" in the main menu at the top of this website. http://www.naplesrealestateguys.com/
0 votes Thank Flag Link Fri Jan 18, 2013
since you are closing in 2013 you will have until 12/31/2013 to file your homestead and mortgage exemption on your home. the exemption will go into effect may 2014. if you are escrowing your property taxes and home owners insurance you will want to contact your mortgage servicer in May 2014 and ask them to readjust your escrow account which will lower your monthly payment.
0 votes Thank Flag Link Fri Jan 18, 2013
Since Indiana homeowners pay their taxes in arrears, the taxes that are being paid this year are actually the taxes for last year, so you shouldn't be able to realize the savings from your Homestead exemption until next year in the May 2014 tax payment. This year, the taxes for 2012 will have to be paid according to the previous owners' exemption status.
0 votes Thank Flag Link Thu Jan 17, 2013
Indydomer - You are only temporarily inheriting the high property tax. I'll try to explain.

When you close in February, you will receive a tax credit from the seller for 1 year and 1.5 months of taxes at the higher rate, if your purchase agreement was written as such. Since we pay taxes in arrears, the seller will actually be paying for taxes due last year, payable this year. Assuming you are an owner/occupant with homestead exemptions filed, you will pay approximately 1% or half the current amount beginning in May 2014.

For the next year, you will pay the higher taxes through your mortgage payment. In May and November 2013, your lender will pay the higher amount for which you have already been reimbursed by the seller. In May 2014, when your bank pays the "now lower amount" you will have approximately twice as much in your escrow account than you will need. When your bank does their yearly audit, you will be reimbursed any excess amount.

You will need to file your homestead exemption by 12/31/2013 to be eligible for the lower amount in May 2014. The tax bill due in May 2014 is payment for the 1st half of 2013. You really do not inherit a higher tax, you will be subject to a delayed reimbursement of an overpayment.

The title company will generally file the homestead exemption for you, but it is ultimately your responsibility to make sure it is recorded.

Congratulations on your new home!
0 votes Thank Flag Link Thu Jan 17, 2013
Thanks for the question.

Depending on how your purchase contract was written, it may be that the Seller will be giving you a pro-rated amount for property taxes due for the period during which they owned the house.

Like a lot of things in Indiana, we do things backwards. Our property taxes are paid in arrears. We live in a house in one year, and we pay the taxes for that year in the following year, and in two installments.

So...and again depending on your situation...you'll be getting a tax bill this year that's due in May. That bill is actually for the first half of last year. Typically the seller will have given you a credit for that amount. You'll still be responsible to pay the bill.

The same goes for a bill that you'll receive that'll be payable in November. That bill is for the last half of last year. Again, you'll need to pay the bill, but hopefully you negotiated an agreement which had the Seller giving you a credit for that time period.

Then, in 2014, you'll receive a bill that's payable in May. That bill will be for the fist half of this year. For the first month and a half of this year, the Seller was still the owner. Again, it may be that the Seller has given you a credit for those 6 weeks or so of taxes.

With respect to your homestead exemption, it's likely it won't take effect until 2014. However, as I hope I've explained above, the fact that the exemption hasn't taken effect is being accounted for in the tax credit that the Seller is (I hope) providing you.

Good luck!

Joe Shoemaker
Principal Broker, REALTOR®
MacDuff Realty Group, LLC
317 413.8501
0 votes Thank Flag Link Thu Jan 17, 2013
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