(Q) I closed in June and it is now October. I just received a tax bill from the Cherokee County Tax Commissioner. Do I owe this bill?
(A) Yes you do. Near the end of every year we receive many calls asking why do I owe the county taxes for the entire year? At closing we pro-rate taxes based usually on the prior year’s tax amount. The seller gives the buyer a credit for their pro-rated share of taxes through that date. For example if the prior years tax bill was $2000.00 and the loan closed on June 1 (exactly 1/2 year), the buyer would receive a credit on the front of the settlement statement for $1000.00. In essence the seller has paid the buyer $1000.00 up-front and then the buyer becomes responsible for the taxes.
If the taxes were to increase from the prior year there is a statement on the third page of the settlement statement that allows the buyer to request more money from the seller for their share of the taxes. For instance, taking the example above, if the actual taxes for the year in which the closing took place turned out to be $3000.00 then the seller should have paid the buyer $1,500.00 instead of $1000.00. The buyer would have the right to seek an additional $500.00 from the seller. Fortunately, taxes seldom make a drstic jump from year to year and most people ignore small increases.
If the closing occurred later in the year and the taxes had already been paid then the buyer would owe the seller the pro-rated share of taxes which they paid. Most metro Atlanta taxes are due around October 15, Cherokee County is December 15 and Fulton County is frequently due prior to October 15. Gwinnett County taxes are normally due in 2 installments of September 15 and November 15.
There are instances where it is difficult to estimate taxes for a current year. This is usually due to new construction where the taxes for the prior year were based on a lot only with no house built. In this instance we usually estimate annual taxes at 1% of the sales price or appraised value.
There, a lengthy answer to a meaty issue.
(Q) Who pays the closing costs in a real estate sale sale?
In Georgia real estate transactions the payment of closing costs are negotiable. If the contract is silent as the payment of closing costs the purchaser will be responsible for the costs. Almost all standard contracts state that the seller will pay the state of Georgia transfer tax which is a $1.00 per thousand based on the sales price. The seller who agrees to pay closing costs should always place a limit on the amount they agree to pay. Normal closing costs for an average size loan run about 3% of the loan amount.
(Q) Why should I use an attorney to close my Georgia Real Estate transaction?
The Supreme Court of Georgia has issued an opinion stating that it is unethical for a non-attorney to close a loan in the state of Georgia. This opinion covers re-finances as well as purchase deals. Now, if you are not an attorney this may not mean very much being that the State Bar of Georgia only has jurisdiction over attorneys. Many lenders have adopted the view that it is illegal for a non-attorney to close loans in Georgia. Others feel that it is OK for a Notary, who is not an attorney, to close loans. While I don’t necessarily think that it is illegal for a non-attorney to close loans I believe that the consumer is much better served by having an attorney close thier loans.
The biggest reason is the ethical obligations imposed upon an attorney by the State Bar of Georgia and state law. When a borrower closes with a Notary it typically goes something like this. The buyer calls an 800 number of applies on line with any of a number of national lenders that we see on TV, read in the newspaper, and hear on the radio every day. The borrower applies for the loan with someone they never see and sometimes never talk to. Assuming that the lender is legitimate, and the loan is actually approved, the lender sends a Notary to your home or office.
In Georgia the requirement to become a Notary is to have two persons who live in the county sign a statement that the Notary is of good character. The Notary then pays a small fee and becomes a Notary. An attorney must attend 3 years of law school, pass a rigorous background check, and pass an extensive exam. I would estimate that at least half the persons who begin law school never become lawyers.
In pointing this out, I am not suggesting that these TV lenders and their bands of Notary Publics are out to scam anyone. I am sure that most have the best of intentions. My point is that if you have a problem with the transaction, that there is very little recourse against a voice on the telephone or the notary who showed up at your house one night. The lenders will discount this fact and claim that you are saving money by using the notary. As I will point out in further entries this is simply not the case. In fact, our discount closing fees, will usually be less expensive than a Notary closing and you receive a lot more for your money.
Many people state that real estate attorneys are not real lawyers and that what we do is easy. There is certainly some truth to the fact that we do not function like traditional lawyers with court appearances, etc. What we do however, is deal with MONEY, a lot of MONEY, your MONEY. Even in a routine refinance transaction you want to be assured that your loans are paid off and properly satisfied at the county courthouse. If you close with digimagicinternetlender.com and the local Notary you basically have no recourse if things go wrong. Many small and large items can go awry in a real estate transaction.
You should never close with anyone except an attorney who has been a full time real estate lawyer for at least five years. Like anything else, the real estate closing process takes time to learn. You don’t need any rookies. Ultimately if you have a problem involving the unethical conduct of an attorney you can complain to the state bar and they will get the attorney’s attention. Chances are the mega lender and Notary are long gone with no incentive whatsoever to straighten out the problem.
Georgia is an attorney closing state. Florida and Texas for example close with title companies and the fees they charge are regulated by the state. Even before our firm introduced the discount fee concept to Georgia and metro Atlanta real estate closings the average Georgia closing was less than half the cost of a Florida closing. In New York every closing has 3 or 4 attorneys present. I can only imagine what it costs there to close a loan. I have seen closing statements from all over the country and our fees in Georgia either match or beat the fees in other states.