Where do Taxes go in seller financing?

Where do Taxes go in seller financing?

Orange, CA · Member since 2018 · 71 posts · 10 votes

Thinking of obtaining a property through seller financing, since they are giving me such a low interest rate and low price in Phoenix, Arizona. 

So my question is, where do the taxes go? or is that something I have to pay at the end of the year and not a monthly payment? 

Anything else I should consider or take out of the "expenses" when dealing with seller financing? 

Thanks in advance 

Peter 

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Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
8y

Hey @Peter Bui - typically when utilizing seller financing the buyer (i.e. new owner) is responsible for the taxes and typically will save up the funds to pay the whole tax bill each year.  I've not heard of a situation where the financer would do an escrow and frankly I wouldn't want to have to depend on them to pay it.  If it doesn't get paid, you are the one that can end up losing the property.

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  • Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
    8y

    Hey @Peter Bui - typically when utilizing seller financing the buyer (i.e. new owner) is responsible for the taxes and typically will save up the funds to pay the whole tax bill each year.  I've not heard of a situation where the financer would do an escrow and frankly I wouldn't want to have to depend on them to pay it.  If it doesn't get paid, you are the one that can end up losing the property.

  • Orange, CA · Member since 2018 · 71 posts · 10 votes
    8y
    Michael Seeker thanks Mike! Exactly what I was looking for. I appreciate the detailed response
  • Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    The seller/lender Should set this up with a serving co. and escrow taxes/insurance just like a traditional lender.
  • Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
    8y

    @Peter Bui You can open escrow through a third party or pay in full, many ways to structure it. Ultimately you'll make it whatever you and the seller are both happy with.

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