Home Selling in New York>Question Details

Jrdp04, Home Seller in New York, NY

what happens with the property taxes during a short sale in New York.?

Asked by Jrdp04, New York, NY Sun May 29, 2011

Help the community by answering this question:


Tax liens are always the first to be paid at closing followed by water, bank and mechanical liens.

Fajardo Delacruz
Licensed Real Estate Agent
Century Homes Realty Group LLC
Web Reference: http://www.desire2own.com
0 votes Thank Flag Link Thu Jun 2, 2011
During the process of obtaining a short sale approval, the potential open/unpaid property taxes are submitted on the proposed HUD1 settlement statement to the lender. I cannot stress to you enough the importance of having a listing agent who has worked with short sales and been successful in having them approved and closed.

The lender generally approves the payment of any open taxes from the proceeds of the sale. The taxes are prorated and adjusted to the date of the closing just as a standard sale and are not an additional expense for the of the buyer. I have yet to see a short sale lender not pay for open property taxes. Bottom line, a short sale needs to be handled by an experienced Broker.

If you have any specific questions on your particular transaction feel free to contact me.
0 votes Thank Flag Link Thu Jun 2, 2011
Dear Jrdp04,

There could be several answers to your question. By definition, a short sale is typically the sale of a property in which the proceeds of the sale are less than the amount owed. Many people believe that the amount owed is mostly mortgage and usually, they'd be right. However, the amount owed includes any other debts that are tied to the property (i.e. liens: mortgage, taxes, municpal and/or mechanic's liens, etc). For the sake of your question, I'll assume you're speaking about a property that has a mortgage.

In many cases, even when a homeowner/borrower falls behind on mortgage payments, the lender will pay the property taxes. The bank/lender will use the tax escrow that is on reserve to keep the taxes current. Once that escrow is exhausted, many (if not most) banks will continue to pay the taxes. The bank does not want someone else buying the tax lien from the municipality. That would only complicate matters. The taxes the bank pays on behalf of the borrower would be added to the amount in arrears that is owed to the bank. At the closing, the taxes would be part of the "forgiven debt."

That said, some banks do not pay the taxes when a borrower falls behind. The taxes would become another "bill" at the closing table. Back taxes would be discovered during the title/lien search. Taxes take priority over all other debt; therefore, they are typically paid at closing. They do not remain with the property. Further, any known bills, debts and liens would be made known to the bank in the short sale application and preliminary HUD or proceeds statement. Before the bank approves the sale, they would know exactly what their "take" would be along with all the other charges.

In regard to any possible income tax implications should be discussed with your accountant. There are exemptions that you can employ concerning debt forgiveness, even if the bank issues a 1099.

Are you currently attempting a short sale? Do you have an agent involved? It's extremely important to hire an agent to assist in selling when you're in a short sale situation. Choosing the RIGHT agent is imperative. Short sales are very tricky and cannot be "learned as you go." As a certified distressed property expert and a Short Sale and Foreclosure Resource (SFR), I've successfully assisted several dozen homeowners navigate the difficult and emotional short sale transaction. I would be happy to discuss your situation off line. Feel free to contact me directly with any questions.


John R. Wuertz
Vice President, Associate Broker
The Corcoran Group
0 votes Thank Flag Link Thu Jun 2, 2011
Your attorney can best advise as it relates to your specific situation; generally they are paid at closing.
0 votes Thank Flag Link Mon May 30, 2011
The property taxes will be paid at closing, if not prior to closing. However, a seller may have tax implications after a short sale from the debt forgiven. You should speak to your accountant regarding tax implications.

We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states

MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes Thank Flag Link Sun May 29, 2011
They are paid with the proceedes of the sale. So technically the buyer does.
0 votes Thank Flag Link Sun May 29, 2011
They get paid eventually. It's all part of the negotiations.
All Points Realty
New York, Connecticut
0 votes Thank Flag Link Sun May 29, 2011
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