Property taxes are scheduled to rise throughout the Chicago area in the coming year. These changes will go into effect on January 1st and both property buyers and sellers should make considerations for these increases within their sales contract.
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The first increase is the result of the triennial assessment that is taking place throughout many of Cook County’s Townships. This once every 3-year process means that if a homeowner has purchased a home in the past year within one of these townships, then the taxes on the property could rise for the coming year. If this happens, homeowners have the right to appeal the increase. Appealing an increased assessment is important as doing so can maintain the existing tax rate over the coming 3-year assessment period.
Individuals currently looking at property should also take these potential increases into account as they conduct their search and prepare to make offers on property. Most importantly, home buyers should ensure that the updated property tax assessment matches the assessment within the real estate contract. Further, sellers should remember that they are responsible for property taxes through the closing date and should factor this into the sales price.
There are additional options available for buyers and sellers seeking to protect themselves. First, they can negotiate taxes within the contract drawn up by their Chicago real estate attorney. These can be set at a flat 50/50 percentage that evenly distributes the potential impact of an increased tax rate. This is the simplest method, however, home buyers should be aware that this method could mean they’ll pay more in property taxes during their first year of ownership.
Another option is that buyers can negotiate a flat percentage while agreeing that sellers will cover any tax difference that may arise. If both parties agree, then the terms of this agreement should be clearly spelled out to avoid ambiguity and to mitigate any difficulties for buyers in collecting payments from sellers.
Finally, escrow can be increased to cover the upper limits of what the buyer perceives the property taxes may be. Any difference in this sum can be refunded after the sale and arrival of the first property tax bill.
2015 isn’t unique, nor will it be the last time that property taxes are assessed. As always, buyers and sellers should consider the impact of any new tax laws and property assessments prior to signing the sales agreement.