Confusing subject. Jennifer and Edmund are correct. There are two parts. One part is repaying the seller for any real estate taxes that they paid for the entire year. So let’s assume you’re closing on July 1st, and the seller paid $1,200 in taxes, you would reimburse the seller for $600 – the taxes from July 1st to December 31st. After all, it’s only fair that you repay the seller for the real estate taxes while you occupy the property. Part two: The lender will require you to “escrow” some taxes so that this sum plus your monthly payment will be sufficient to pay the real estate taxes when they come due. This isn’t correct, but it should make the point. Assume you close in December, and the real estate taxes are due in January. You will not make enough payments to pay the real estate taxes, so the lender will “escrow” or “bank” some tax dollars at settlement so there’s a sufficient amount to cover the real estate taxes when they come due. A good rule of thumb is 12 months to cover the seller proration and lender tax escrow. One more point. If the seller did not pay the real estate taxes during his tenure, he will reimburse you. You can estimate the real estate tax proration in Pennsylvania with the link below.

Sorry Alex,

It's early in the morning...The Sellers have paid the township/borough and county taxes through 12/31/09 and the school through til 6/30/09. The school taxes are normally due on July 1st. :)

Jennifer Daywalt, Realtor
Re/Max Results Realty
Top Agent 2004, 2005, 2006, 2007, 2008
Author of "Ask The Realtor" Every Saturday in The Phoenix
Sellinghomesjenn@aol.com
610-999-7693 Direct
610-489-7355 Main

Good Morning Alex,

Taxes are paid on a yearly basis to the state, not on a monthly basis. The monthly payment that a seller pays to the mortgage company, if taxes are escrowed, is to insure that their escrow account has a year's worth of taxes in it when the next payment is due....

Let's take a May 1st 2009 settlement date. The seller has already paid the school taxes for June 30th 2008 until July 1st 2009, they have also paid the taxes due January 1, 2009 through December 1, 2009. Therefore when the buyer purchases the property on 5/1/2009 the seller has to be reimbursed for the school taxes which would be from May 1st 2009 through June 30th 2009. In addition school taxes are going to be due June 30, 2009 for the period June 30th 2009 thru July 1st 2010, therefore the mortgage company is going to escrow in the area of 12 months because by the time that buyer makes a mortgage payment taxes are going to be due for the next school year. In addition the buyer will reimburse the seller for the county and township/borough taxes for the period of May 1st, 2009 through December 31st, 2009 as they are already paid. The buyer would then also escrow 6 months of these taxes with the lender as they are due again 12/31/09 and by that time the buyer has paid 6 months of the taxes in payments to the lender but 12 months will be due. I know it can get complicated but I hope this explanation helps.

This is probably a silly question, but I still don't understand what "reimbursement" does the buyer need to do to the seller...
I thought that the monthly payment is called PITI where "T" stands for TAXES, therefore, the homeowner is paying a portion of the yearly property tax every month? So the seller paid for the months he lived in the home, and I'll be paying for the months I live in it. No?

Good Morning LC,

Here is the breakdown of your closing costs in PA....first I will do the prepays which are costs that will come out of your pocket prior to closing. Home Inspection, Termite and Radon, usually around the $600.00 range for all three, appraisal fee to the bank, normally around $300-$350.00, one year of home owner's insurance and this amount depends on the type of home you purchase. Additional fees at the time of settlement would be...the tax reimbursements to the seller and the taxes to be escrowed, the homeowner's escrow for next year's bill, bank fees (should be minimal, Wells Fargo is around $900.00 and that includes the appraisal fee, always why it is a good idea to use a DIRECT lender), title insurance (in PA we do not require a survey of the property, title insurance insures your property and is required by all lenders in the state of PA) pricing will vary depending on the price of the home and if the previous owners have had title insurance within the past 10 years you will get a re-issue rate (title insurance is PA regulated and no one company can charge more or less), endorsements required by the lender with will be $50.00 and there are three unless you are in a condo or a homeowner association then there will be four, if you are in an association you will also pay a couple of months up front and usually a capital contribution to the association which can vary in amount, notary fees so that the documents you sign at settlement can be notarized and a recording fee to record your deed at the courthouse and this will depend on the number of pages that have to be recorded. Some agents will charge a broker transaction fee which again can vary however I do not charge that fee.

I hope all of this information is helpful. You can also contact me if you have a home in mind and I can send you the exact figures. Happy House Hunting!

Jennifer Daywalt, Realtor
Top Realtor 2004, 2005, 2006, 2007, 2008
Re/Max Results Realty
Collegeville, PA 19426
Serving Chester, Montgomery, Delaware and Berks Counties
610-999-7693 Direct
610-489-7355 Main http://www.JenniferDaywalt.com
Sellinghomesjenn@aol.com

Regarding property taxes paid at settlement, there are 2 categories. First, you need to reimburse the Seller for taxes that they have paid in advance for the year from the date of settlement. For example, you settle at the end of April, you will need to reimburse the Seller for May to December. Second, depending on your mortgage loan program, escrows may or may not be required from your lender to assure that funds are available when the taxes come due the following year. So in essence, you are if you escrow, you don't if you don't escrow. Regardless, taxes get paid one way or another.

Lc,

I typically use 13 months worth of taxes when estimating closing costs. I would be happy to prepare an estimate for you. Just email me the property you are interested in and I can get the numbers together for you. If you are already working with an agent they should be able to help you.
Thanks
Greg

Gregory S. Parker, CRS
Coldwell Banker Realty Professionals
2924 Swede Road
East Norriton, PA 19401
Office 610-277-5000 Ext. 249
Direct 610-994-1147
greg.parker@coldwellbanker.com http://www.PhillyAreaHomeHunter.com

Thanks for the helpful answers. When budgeting for how much I need at closing, would you say a good rule of thumb is to plan to have the equivalent of 1 year's cost in property taxed (in addition to down payment and all the other fees) to be sure I am covered on that front?

Hi. First I must tell you that you've chosen a GREAT time to buy! The Spring market is busy, busy, busy and very favorable to buyers:)

Jennifer answered your question very well...... Bottom line: while it may seem as if you're paying quite a bit up front, your taxes are actually prorated depending upon when you close on a property.

If you have any additional questions, I'd love to help you. Feel free to call me direct at (610) 324-5240.

In addition, my website http://(www.JudysFineHomes.com) is full of useful resources and information -- for both Buyers and Sellers -- including FREE Special Reports as well as information about me and the expertise I provide to my clients -- whether Buyers or Sellers.

Good luck in your home search -- and sale! If I can help you along the way, don't hesitate to contact me.

Warmly,
Judy

Judy May, Esquire, REALTOR
"A Refreshingly Different Real Estate Experience" http://www.JudysFineHomes.com http://www.CollegevilleAreaHomes.com
judy@JudysFineHomes.com
C: 610.324.5240

CENTURY 21 Alliance
2828 Audubon Village Drive
Audubon PA 19403
O: 610.666.0202 x. 226

Search THOUSANDS of homes! http://www.CollegevilleAreaHomes.com

Hello LC,

In PA you must pay the seller back for the taxes they have already paid. Most areas have their county and township taxes on a calendar year....January to December and the school taxes run from July through to June. It does seem as though there is a year's worth of taxes in the closing costs as in addition to repaying the seller, if you are escrowing your taxes you must have enough to cover the taxes due. For example...if you settle on a property in May the mortgage company would escrow six months of taxes as by the end of the year you would have paid an additional six months through your escrows bringing the total in escrow to one year. However there is an aggregate adjustment made at the time of settlement as mortgage companies are not allowed to cushion your escrow account. That adjustment is made on the HUD1 (which shows where all of your money went) at the time of settlement and to date we aren't quite sure of the formula used.

I'd be happy to answer any of your questions. Always feel free to contact me.
Jennifer Daywalt, Realtor
Re/Max Results Realty
Top Realtor 2004, 2005, 2006, 2007, 2008
610-999-7693 Direct
610-489-7355 Main Office http://www.Jennifer Daywalt.com
Sellinghomesjenn@aol.com

Hi, LC,

PA is different than NJ. In New Jersey, taxes are paid quarterly, therefore when creating the escrow it is for 3-6 months.

In PA taxes are paid yearly, therefore, at closing, you will reimburse the seller for what he has already paid and not used, and will also put money in your escrow towards the next year bill. When added together it comes out to approximately 1 year. You are not putting the entire year in escrow, but the combination of the two numbers results in that total.

If you have other questions about this, don't hesitate to ask me.

Carol Murray Cei
ReMax Millennium
215-643-9661
carolcei@remax.net