Humber/Ontario Real Estate Course 2 Exam Practice

Who pays property taxes at closing if the seller has already paid for the entire current year?

1. Buyer pays back property taxes.

2. Property taxes are ignored in the adjustment.

3. Seller receives a credit for overpayment.

4. Buyer deducts paid taxes from the final price.

5. Both parties share the tax cost equally.

6. Additional charges to the buyer are applied.

The correct answer is: Seller receives a credit for overpayment.

When the seller has already paid the property taxes for the entire current year, they have essentially prepaid the taxes that cover the period beyond the closing date. Since the seller has prepaid the property taxes, they are entitled to a credit for the overpayment at the closing. This credit is typically reflected in the adjustments made during the closing process. This is why option C, "Seller receives a credit for overpayment," is the correct answer. In contrast, the other options are incorrect because they do not align with the usual practice in real estate transactions regarding property taxes at closing: - Option A, "Buyer pays back property taxes," is not necessary as the seller has already paid for the entire current year. - Option B, "Property taxes are ignored in the adjustment," is not accurate because property taxes are typically part of the adjustments made at closing to ensure a fair distribution of costs between the parties. - Option D, "Buyer deducts paid taxes from the final price," does not reflect the standard practice where the seller would receive a credit for the overpayment. - Option E, "Both parties share the tax cost equally," is not the case when the seller has already paid the property taxes in full. - Option F, "Additional charges to the buyer are applied," is not typically done in this situation as the seller would receive a credit for the overpayment instead.