Debits & Credits, Credits & Debits

In the vast majority of real estate closings in Minnesota — 99.45%**, to be exact — the title companies doing the closing have to calculate a  pro rata property tax adjustment between the Buyer and Seller

That’s because in Minnesota, homeowners pay property taxes twice a year (May 15 and October 15), with the payments covering the first and second halves of the year, respectively.

When closing occurs in the middle of those intervals, either the Buyer owes the Seller (if they paid for a portion of the six months that they’re not living in the house); or, the Seller owes the Buyer (if latter is making a semi-annual payment, but living in the home less than that).

Total Adjustment:  $0

Which leaves the 2 days of the year — June 30 and December 31 — that fall at the exact end of the semi-annual tax periods.

Assuming the Seller made the most recent payment, no adjustment is necessary, because the Seller lived in the home the most recent six months, and paid the property taxes for that exact interval.

P.S.:  While closings on June 29 (I had one this am) require a pro rata calculation . . . it should be a very small amount.

**363 ÷ 365 = 99.45%.

See also, “May Closings & (Minnesota) Property Taxes“; and “What’s in a Name? From “Settlement Statement” to “HUD-1” to “ALTA” Back to “Settlement Statement”.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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