June 15 Closing: Who Owes the Taxes and Whose Husband Is Missing?
Closing is set for June 15 on a $340,000 resale in Tempe. The county's annual property tax on the parcel is $2,190, billed for a fiscal year that runs July 1 through June 30; the bill for the fiscal year ending this June 30 has not been issued and is not due until the following October and March. The buyer's lender will escrow taxes. Title shows the seller as the sole owner; she bought the home two years before her marriage using her own funds, and her husband has never signed anything. At the last minute the seller agrees to give the buyer a $4,000 credit for carpet and paint rather than reduce the price.
1. Compute the tax proration on a 365-day basis, identify the debit and the credit, and explain the logic.
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Step 1 - daily rate. $2,190 ÷ 365 = $6.00 per day.
Step 2 - who owns how many days. The buyer owns the day of closing, so the seller is charged through June 14. July 1 through June 14 is 31+31+30+31+30+31 (Jul–Dec = 184) + 31+28+31+30+31 (Jan–May = 151) + 14 = 349 days. The buyer gets the remaining 16 days (June 15–30). Check: 349 + 16 = 365.
Step 3 - dollars.
- Seller: 349 × $6.00 = $2,094.00
- Buyer: 16 × $6.00 = $96.00
- Total: $2,190.00 ✓
Step 4 - direction. Debit the seller $2,094.00 and credit the buyer $2,094.00 on the settlement statement. The buyer's lender will also collect for its escrow account, which is a separate line item and should not be double-counted against the proration.
Why: Arizona taxes are paid in arrears - the bill for a July 1–June 30 fiscal year is issued and paid after the year ends, in the October and March installments. At a June 15 closing the seller has consumed 349 days of a year of services that no one has paid for yet, so the seller owes the buyer for that occupancy. If the seller had already paid the bill, the entry reverses: credit the seller, debit the buyer for the buyer's 16 days.
Two cautions: the contract's proration clause controls (some forms prorate on the most recent actual bill rather than an estimate), and a leap year uses 366 days.
2. Does the husband need to sign? Describe the risk if everyone closes without him and the practical fix.
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Start with how the property was acquired, not with the marriage certificate.
- Arizona is a community property state. Property acquired during marriage is presumed community property, and both spouses must convey. Property acquired before marriage with separate funds and kept in one spouse's name is that spouse's separate property, and the non-owner spouse's signature is not, strictly speaking, required to convey legal title.
- So on these facts the seller can convey, and record title is clean. That is where the analysis would stop if you were only reading the deed.
The risk the buyer runs by closing without the husband: separate property can lose its character. If community funds paid the mortgage, paid for improvements, or paid down the loan during the marriage, the community may acquire a reimbursement or equitable interest, and the husband could later assert a claim against the property. A title insurer knows this, which is why it will typically require either the spouse's disclaimer deed or an affidavit establishing separate property and separate funds before it will insure without exception.
The fix, before close: the title company conditions the policy on a disclaimer deed from the husband (or other satisfactory evidence of separate property), the agents disclose the issue to the buyer in writing, and the closing waits. If the property had instead been acquired during the marriage, this would be non-negotiable: both spouses sign the deed or there is no conveyance.
Do not paper over it with a verbal assurance. If the husband later refuses to sign, the buyer's remedy is a title contingency, not a lawsuit after funding.
3. The $4,000 carpet-and-paint credit: what changes for the buyer's loan, and how would you compare it with a price reduction?
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A credit is not the same dollar as a price cut, because lenders treat the two differently.
- A seller credit is a concession and counts against the program's cap, which scales with loan-to-value: roughly 3% of price at LTV above 90%, 6% between 75.01% and 90%, and 9% at or below 75% on a conventional primary residence. On a $340,000 price those ceilings are roughly $10,200 / $20,400 / $30,600, so $4,000 fits at any tier - but the answer depends on the loan program (FHA caps at 6%; VA has its own rules), and a buyer near the LTV break point should check with the loan officer before agreeing.
- A credit also cannot exceed actual closing costs and prepaids, and it cannot be applied to the down payment. The buyer cannot walk away with cash; excess credit is lost or renegotiated.
- A price reduction lowers the purchase price, which lowers the loan amount, the monthly payment, and - at high LTV - may move the buyer into a lower-cost mortgage insurance tier. It also lowers the appraised-value benchmark for the lender and resets the comparable sales the next buyer will look at.
How to choose: if the buyer is cash-tight on closing costs, the credit is the better tool because it converts into dollars at the table. If the buyer's constraint is the monthly payment or mortgage insurance, the price cut wins. Either way, the credit must appear on the settlement statement and be disclosed to the lender - an undisclosed side credit is a fraud issue, not a negotiation tactic.