Are property taxes included in your pre-paid (closing cost?)?

Question

My husband & I bought our house in July 2006. We got a bill yesterday stating that we owe taxes from 2007 & 2006. I thought that when we bought our house that we had paid our taxes up until this year (part of our closing cost) Aren't you required to pre-pay your home owners insurance & taxes for 1 year when you buy a house?

We live in Michigan & had a private party sales transaction (we bought our house from my cousin)

Answer 1

Homeowners insurance yes, property taxes, no. Property taxes are usually paid twice a year if you don't have them built into your mortgage through an escrow account. Call your mortgage company they should be able to tell you what you need to do now, it may or may not be an error.

Answer 2

In NY the real estate tax is part of the monthly mortgage payment.  You do not prepay at closing.   Make your lawyer pay for failure to inform you.

Answer 3

I don't know that you have to pre-pay homeowner's insurance and property taxes for one year when you buy a house. When I bought my house, you had to have homeowner's insurance, but not prepay it for one year, and for property taxes, escrow takes care of that. It depends on your loan; property taxes aren't automatically included.

Answer 4

Oh, that just happened to us. What happened was the bank we bought the house from prorated the taxes, so they were included in the closing. We basically got the tax money applied as a credit, so we paid the full amount when the taxes came due. The only way you can get this done is if it is included in the closing.

Answer 5

Around here (NY), the tax adjustment at closing is designed to reimburse the seller for property taxes they may have paid beyond the closing date.  For example, if the property owner pays his property taxes for the coming year on 7/1/07 and then sells the property on 10/1/07, the buyer must reimburse the seller for 3/4 of a year's worth of taxes -- for the period from the closing date on 10/1/07 until the next annual tax bill is due on 7/1/08.  The buyer doesn't have to pay any property taxes to the town until the next bill is due on 7/1/08.  

If the property taxes are escrowed as part of the buyer's monthly mortgage payment, the buyer does have to make tax payments to the bank (not to the town) -- some at closing (probably 1/4 of a year's worth, in this example) and some each month with the mortgage payment -- so that the bank will accumulate enough to pay the annual taxes to the town when the next annual bill comes due on 7/1/08.

So these two payments at closing may be the source of your comment that you paid a year's worth of taxes at closing -- in my example, you would have paid 3/4 to the seller and 1/4 to the bank holding your mortgage.  If the bank is holding escrow payments toward future property taxes, it is their job to pay the property taxes when they come due.  If this is your situation, you should check to see why they didn't pay the next property tax bill when it arrived.