When you buy a home, and the seller gives you credit for real estate taxes, where does the money go?
Answer:
That money at closing will go directly to the city if the taxes have not already been paid, or if they have then the money will go to your mortgage company to reimburse them for your escrow.
It goes to the buyer, or more properly the buyer keeps it as if it was a reduction in the purchase price by that amount.
If a seller has paid taxes in advance, you aren't given a credit for them . they are.
Lets say the seller paid 3rd quarter taxes back in July. You close today. He or she gets a credit from you for the taxes from today through the end of the 3rd quarter.
These items would normally appear in lines 106, 107 and 108 (buyer's side) and lines 406, 407 and 408 (seller's side) on a standard HUD.
The credit will show on the buyers side of the HUD1. Then when the tax bill comes in the buyer is responsible for the entire amount because the seller paid theirs at closing as the credit to the buyer.
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