Property taxes in Texas are sometimes the most understandable and tricky of all costs you consider while buying a property in Texas. It can be a little challenging to find out when and what you will owe. Especially if you are a first-time homeowner, you may not understand the unpaid taxes with preexisting closing, which are not paid after the conclusion. It is often problematic for your realtor to inquire about how much property taxes you and the seller will owe upon closing or on any tax liens.

Who Pays the Property Tax?

Property taxes are typically prepaid for the entire year, either by the owner or through an escrow account with their mortgage lender. Precisely who pays will depend on the sales agreement, seller’s closing date, the date taxes are due, and the sales agreement. 

Property taxes are usually prepared for one year either through an escrow account or the house owner with their mortgage lender. 

Let us consider an example, as an incentive to sell, you as the buyer may attempt to pay the total property tax for the year. What is significant is that before the closing date, paying property tax is the seller’s liability, but starting on the closing date, it is the buyer’s duty as the new owner.

Proration

It is important that when purchasing a property, you make sure your realtor gives you an accurate estimate of your annual property tax based on your exemptions should you qualify.

Prorating is known as the act of dividing property taxes, insurance, interest, premiums, rental income and more in between buyer and seller in proportion to the time or date of closing. To prorate simply means to allocate. Briefly prorate taxes means to allot taxes that have accrued that is the expense is chargeable to a party but cannot be paid yet.

Sometimes, new owners get a sudden increase in property taxes the following year after purchasing the property. This increase could be due to the previous owner qualifying for exemptions such as age or veteran status, which you do not, and the prorated taxes were calculated based on these values. Suppose a transaction closes at a time during the year when tax statements are not available. In that case, the taxes are prorated or allocated to the buyer and seller with a debit and credit entry on the closing statement. 

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