Greetings TexAgs -
I recently bought my first home and ran into a tax issue. I am not sure of the next step but would greatly appreciate any insight/advice.
Background:
Bought the house in October which meant the seller owned the house for about 80% of the year. There was an adjustment made at closing on the estimated property tax amount in which the seller credited back around $4,160 to represent his portion of the tax bill.
Using rounded amounts for ease, the tax adjustment calculation was:
$5,200 estimated tax amount * 80% = $4,160 adjustment at closing.
That $5,200 was based on the 2018 property tax amount which included a homestead exemption and over 65 exemption for the seller. It was my understanding that these both would transfer over in the transaction.
The situation:
At some point recently the tax office (this is per the tax office) realized that the seller had a homestead exemption elsewhere in addition to on the home he sold us. The tax office was not clear on if this discovery was due to their own reconciliation or due to the seller moving over the over 65 exemption himself. Nonetheless, both exemptions were taken away from my home for the 2019 property tax calculation which has left us with a bill of around $11,200. This is of course a major increase over the ~$5,200 we were expecting. It also means the seller only covered about 37% of the bill in the closing adjustment.
What I need help with are what the next steps are. I am sure that I am not the first one this has happened to but I have had trouble finding solid info online about this. The tax office and my real estate agent suggested I talk to the title company which I did. They provided me with the below language from our closing contract that we both signed:
This language seems to say that not only should I work it out with the seller, but that it is expected that I do when there is a difference.
Next steps:
So with that, should I start by sending a letter myself or should I get a lawyer involved to start with due to the relatively large difference. Note that the seller is actually a lawyer (I am not).
Further, I am unsure which I should be seeking:
My thinking on the second one is that the home was sold with the exemptions in place and that's what we were expecting to get. Receiving the full amount of the difference would make me whole again.
My biggest fear in all this is that my communication attempts are ignored and but I guess that is when going to small claims court becomes necessary.
This is in Harris County for reference. Also note, I am NOT over 65 and this is now my homestead so I will be applying for 2020 homestead exemption shortly.
One final thing on actually paying the taxes - the HCAD website has changed the home ownership to my name as of a few weeks ago, but the Harris County tax website (where the bill is actually paid) still reflects the previous owner. They have assured me that this does not matter and that I should pay anyways, but, I feel weird about making a payment this big under someone else's name essentially. Mainly feel odd due to the 2020 tax deduction that I obviously want to claim. Any advice on this as a separate issue?
Replies or PM's are greatly appreciated.
I recently bought my first home and ran into a tax issue. I am not sure of the next step but would greatly appreciate any insight/advice.
Background:
Bought the house in October which meant the seller owned the house for about 80% of the year. There was an adjustment made at closing on the estimated property tax amount in which the seller credited back around $4,160 to represent his portion of the tax bill.
Using rounded amounts for ease, the tax adjustment calculation was:
$5,200 estimated tax amount * 80% = $4,160 adjustment at closing.
That $5,200 was based on the 2018 property tax amount which included a homestead exemption and over 65 exemption for the seller. It was my understanding that these both would transfer over in the transaction.
The situation:
At some point recently the tax office (this is per the tax office) realized that the seller had a homestead exemption elsewhere in addition to on the home he sold us. The tax office was not clear on if this discovery was due to their own reconciliation or due to the seller moving over the over 65 exemption himself. Nonetheless, both exemptions were taken away from my home for the 2019 property tax calculation which has left us with a bill of around $11,200. This is of course a major increase over the ~$5,200 we were expecting. It also means the seller only covered about 37% of the bill in the closing adjustment.
What I need help with are what the next steps are. I am sure that I am not the first one this has happened to but I have had trouble finding solid info online about this. The tax office and my real estate agent suggested I talk to the title company which I did. They provided me with the below language from our closing contract that we both signed:
Quote:
8) PROPERTY TAX PRORATIONS. Property taxes for the current year have been prorated between BUYER and SELLER, who each acknowledge understanding that these prorations are based either on tax amounts for the preceding year or on estimates of the appraised value and/or estimated tax rated for the current year. SELLER agrees that any default in prior payment of property taxes, either current or delinquent, will on demand be promptly reimbursed by SELLER to TITLE COMPANY. BUYER and SELLER each agree that, when amounts of the current year's taxes become known and payable (on or about October 1st), they will adjust any matters of re-proration and reimbursement between themselves and that TITLE COMPANY shall have no further liability or obligation with respect to these prorations.
This language seems to say that not only should I work it out with the seller, but that it is expected that I do when there is a difference.
Next steps:
So with that, should I start by sending a letter myself or should I get a lawyer involved to start with due to the relatively large difference. Note that the seller is actually a lawyer (I am not).
Further, I am unsure which I should be seeking:
- 80% of the new amount with the amount already adjusted netted amount. IE: 80% * 11,2000 - 4,160 = $4,800 OR
- 100% of the new amount: 11,200 - 5,200 = $6,000
My thinking on the second one is that the home was sold with the exemptions in place and that's what we were expecting to get. Receiving the full amount of the difference would make me whole again.
My biggest fear in all this is that my communication attempts are ignored and but I guess that is when going to small claims court becomes necessary.
This is in Harris County for reference. Also note, I am NOT over 65 and this is now my homestead so I will be applying for 2020 homestead exemption shortly.
One final thing on actually paying the taxes - the HCAD website has changed the home ownership to my name as of a few weeks ago, but the Harris County tax website (where the bill is actually paid) still reflects the previous owner. They have assured me that this does not matter and that I should pay anyways, but, I feel weird about making a payment this big under someone else's name essentially. Mainly feel odd due to the 2020 tax deduction that I obviously want to claim. Any advice on this as a separate issue?
Replies or PM's are greatly appreciated.