When buying a property that is part of a larger tract and where the parcels have not been separately assessed, buyers (and their representatives) should pay close attention to the taxes being reimbursed to the seller on the HUD-1 Settlement Statement. We are also seeing more transactions where a single family residence is located on a substantial tract and a portion of the land is not included in the sale. The vacant land is either partitioned off for future development or purchased by an adjoining property owner. When it comes time to calculate the proration for the HUD-1, the new buyer should only be responsible for reimbursing the seller for a portion of the tax bill and not reimburse for taxes on the land not being conveyed. While not easy, an experienced title professional should be able to arrive at the appropriate tax liabilities.
And if you are involved with new construction in a large subdivision, follow the same process. A buyer should reimburse a developer based upon the percentage of land being purchased and not on the tax bill for the entire, unimproved parcel. The buyer can expect to receive an interim tax bill at a future date for the full improvement.
