Do I need a lawyer in a Residential Real Estate Transaction: Part II
Buyer closes on a home purchase in December. The prior owners held title for thirty years and occupied the property as their homestead. Tax pro-rations are based on last year’s taxes in the amount of $3,000.00 (this is the custom and practice in the industry). Both parties sign a re-proration agreement agreeing to adjust tax proration and compensate for an increase or decrease in the taxes when the actual tax bill comes out the following year. To the shock and chagrin of the Buyer, next year’s tax bill assesses taxes in the amount of $20,000.00 (based upon the purchase price of $1,000,000.00). The Sellers are nowhere to be found.
Because the Buyer was not represented by counsel at closing, there was no one there to advise the Buyer of the potential for a large increase in property taxes. The taxes for the year of closing were artificially low because of the homestead tax exemption and correspondent limitation of 3% maximum increase per year (“Save Our Homes” cap). In a situation like this, arrangements could have been made to escrow a certain portion of the purchase price until the following year’s tax bill came out in order to protect the Buyer. Alternatively, the pro-rations could have been calculated based on an estimate of the next year’s taxes utilizing the tax estimator available on the Property Appraiser’s website.
Gibbons | Neuman is here to protect you in connection with your residential real estate transactions. Please feel free to give us a call.
Rod B. Neuman, Esquire
3321 Henderson Boulevard
Tampa, FL 33609
Tel: 813 877-9222
Fax: 813 877-9290
Florida Supreme Court Certified Circuit Court Mediator
Certified Mediator, United States District Court,
Middle District of Florida