Benchmark Title Company, LLC

 

Oops!  If you caught my typo on the birth of title insurance last week where I said it all began in 1968, you were probably wondering if Benchmark's President, John Howe, was there the day the first title policy was written.  Actually it all began in 1868, not 1968, and the first title insurance policy was written on June 19, 1876, nearly 100 years before John first ventured into title insurance.  Sorry for the confusion!

Now hold on to your hats because this week's Title Tip explains property tax prorations, which can be a bit confusing.      


Property Tax Prorations
by Sarah Holdener, Esq.

Bills for the 2006 property taxes have begun to go out to landowners in many Metro East counties.  At this time of year confusion regarding tax prorations is rampant and a source of frustration for all parties to a real estate transaction.  One of the main reasons for confusion is the fact that Illinois collects property taxes in arrears.  Purchasers new to Illinois frequently call us to ask why they are receiving tax bills in June of 2007 for the 2006 tax year when their seller was in title to the property for all of 2006.

Suppose for example, we are closing a sale-purchase transaction on residential property on May 25th, 2007.  The tax bills have not yet been mailed out and the only available information is from the property tax bill for the 2005 tax year, sent out in June of 2006 because of the arrearage system - in the amount of $3,000.00.  Seller paid the 2005 taxes in June of 2006.  Seller has lived in the property for all of 2006 and 2007 through the day of closing on May 25, 2007.   Typically the real estate contract will provide that Seller is responsible for the property taxes up to and including the day of closing, even if Buyer takes possession that day.  

In these circumstances, the title company does the following at closing:  (1) credits to Buyer and debits from Seller $3,000.00 to cover the 2006 taxes which will become due in June 2007 so that Buyer has the funds to pay the 2006 tax bill when it arrives, and (2) prorates the 2007 taxes by crediting to Buyer and debiting from Seller an amount representing the portion of 2007 that Seller was in title to the property, based on the following formula - "Prior Year's Tax Amount" / "365 days in a year" x "Number of Days Seller was in Title" = "Credit to Buyer at Closing" (in our example - $3,000.00 / 365 days/year x 145 days between 1/1/07 - 5/25/07 = $1,191.78).  In this example the total of $3,000.00 for all of 2006 plus $1,191.78 for the Seller's ownership in 2007 equals a credit to Buyer out of Seller's proceeds in the amount of $4,191.78.

Now supposed the closing date has moved to June 25, 2007, and the property tax bills for 2006 have been mailed out to landowners.  If our fictitional Seller's tax bill is anything like mine it would have increased to about $3,200.00 for the 2006 calendar year.  Working with the same formula above (now for 176 days of 2007) we would prorate the 2007 portion of the taxes and credit Buyer in the amount of $1,543.01 out of Seller's proceeds.  However, rather than add this to another credit from Seller to Buyer for the 2006 tax year, we would debit the $3,200.00 from Seller's proceeds and send the money directly to the County Treasurer's Office to pay the 2006 tax bill.

It should be noted that we always work from the most recent County Treasurer's tax bill and do not obtain tax information from the County Assessor's Office.  Until the tax bills have been mailed out and are considered final we do not rely on the Assessor's records because the property assessments may not yet be available or may not be accurate because a reassessment is underway or has not yet occurred, or the county multiplier may not yet be available or final.  However, if the parties are not happy with a proration based on the most recent tax bill we are happy and willing to prorate taxes based on the agreement and instruction of the parties.  Such arrangements typically occur when the property has recently been subdivided and the prior tax bill is for a much larger parcel, or when a new building has been constructed on the property and the prior assessment was for land only.

Additional information regarding tax bills can be found by contacting your County Treasurer's Office or visiting them online. 

Any questions can be directed to Benchmark Title at 618-239-3750. Please feel free to call or email: 

John Howe
President

Doreen Miller, Esq.
Commercial Division Manager

Sarah Holdener, Esq.
General Counsel,
VP Production

Michelle Null
VP Escrow Operations


Serving you from three convenient locations:

Main Office:
1124 Hartman Lane
Shiloh, IL 62221
Ph: 618-239-3750
Escrow Fax: 618-239-3707
Title Fax: 618-239-3757
Fax Orders: 618-310-1589
President: John Howe
www.benchmarktitle.net

318 North Main St.
Columbia, IL 62236
Ph: 618-281-9700
Fax: 618-281-9705
Manager: Randi Schur

4215 S. State Rte 159
Glen Carbon, IL 62034
Ph: 618-288-1695
Fax: 618-288-1852
Manager: Sara Sowell

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   Employee Spotlight

 Debbie Jetter

Debbie Jetter, Escrow Officer in our Shiloh office, worked in banking for 30 years before venturing into title insurance as a Closer for Benchmark in 2003.  Debbie started out as a receptionist at a bank and worked her way up to Loan Processor, then Commecial Loan Processor, and Administrative Assistant.  Since joining Benchmark Debbie has proven herself to be an outstanding closer of residential and commercial transactions.  Her background in banking has given her an advantage in understanding and working with lenders to get the deal closed.  Debbie resides in Belleville with her husband, Steve, and has two sons, Chris, 24 and a student at Murray State, and Matt, 18 just starting his freshman year at SIUE.  Debbie can be reached at 618-239-3750 or by email at djetter@benchmarktitle.net

 
















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