Estimated Porperty Taxes can cut into profits significantly!

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Hi BP community!  I'd like to share a tip that could save you thousands of dollars when purchasing and selling a piece of real estate.  

A tax prospect I recently worked with shared some information on how they got screwed in a real estate transaction when they weren't aware of how the property taxes would be paid and split by the seller/buyer for their time owning the house in a given year.  **Make sure to know when and how the property taxes are paid**. This example took place in Ohio where property taxes are paid in arrears (the year after).  So 2017 property taxes are paid in 2018. Meaning if you purchased a property, you will be responsible for paying the previous owners share of property taxes.

The way this works involves the seller at the time of the sale crediting an amount to the buyer for their estimated taxes owed for the given year.  This sounds like standard procedure but if not looked into properly could severely cost you thousands of dollars, sucking your profits.  The situation that burned the individual is that the title company used "the best information available" to determine the estimated taxes owed by the seller.  

The problem is that the seller had upgraded the property by about $50,000 in value and the county within Columbus, Ohio had appreciated in value drastically since the last assessment of home values.  A new assessment was done the year the individual bought the property but the new values were not released until year end.  So the estimated taxes credited by the seller to the new buyer was based off of old valuations at an older assessment.  Meaning, their estimated taxes were based on a property value almost $100,000 less than the current value.  When the individual sold the house a year later after flipping the property, they lost $5000 in profit because the money they were putting into escrow for tax payments was used to pay for the previous owners tax bill.  The seller's credit to the buyer at the time ended up being around $5000 less than what they actually owed, but once the transaction is completed the seller no longer has responsibility leaving the buyer holding the bag.

I'd be happy to share more details and how to avoid this!