Property taxes should be fairly split between buyer, seller at closing

Q: My husband and I purchased our first home in December. We haven't had any problems but a Realtor friend of ours recently told us we should expect a large increase in our tax bill. She says it's because our "valuation" went up dramatically. She also says we won't know for sure until the second installment tax bill comes out this spring. Our house is in Cook County. We are wondering if we could have done anything differently to protect ourselves from this?

A: Sounds like your property was subject to Cook County's triennial assessment. Every year, Cook County reassesses a different third of the county. One year it's the North and Northwest suburbs, one year it's the South and Southwest suburbs and one year it's Chicago. So, wherever your property is located, it is reassessed once every three years.

Your tax bill is computed by multiplying your assessed valuation times any applicable multiplier times the local tax rate. Multipliers and tax rates don't ordinarily change much, so increases and decreases in your tax bill usually coincide with increases and decreases in the assessed valuation.

Assessed valuations are published at the Cook County assessor's website. Punch in your property index number (PIN) and you can view the current and prior years assessed valuations. If you see a large jump in the assessed valuation from 2018 to 2019, you can expect a somewhat comparable increase in your 2019 tax bill, payable in 2020. All counties also mail out current valuations once they are determined. You would generally expect to have received the 2019 valuation in the mail between spring and fall of 2019.

Many if not most attorneys check assessed valuations when they represent purchasers. In the event they observe a significant increase in the assessed valuation, the attorney will request a tax proration above the customary 105% of the last known tax bill. A 105% tax proration means that real estate taxes for 2019 are prorated based upon 105% of the 2018 real estate tax bill, the last known actual bill.

In your situation, first, determine the increase in your assessed valuation from 2018 to 2019. Then, check your purchase file to see if your received a tax proration consistent with the increase in the assessed valuation. This would be reflected in the attorney review correspondence between the attorneys or may have been written in on the contract. If there was a 20% increase in the assessed valuation from 2018 to 2019, you would hope you received a 120% tax proration, give or take. In the event you did, the seller essentially paid for the increased tax bill, which is appropriate, as the seller owned the property for most of 2019.

Regardless of what you find, tax prorations between buyer and seller are final. I should also point out that some valuations come later in the year and are not available for review at the time a purchaser is going through the buying process. And, of course, if you are purchasing early in the year, that year's assessment will likely not have yet been determined.

Q: What can happen to me if I change my mind and decide not to buy the condominium I agreed to buy? Is it just that I lose my deposit? Is there anything else to worry about?

A: Do not believe people who say the only exposure you have when defaulting on a real estate contract is the loss of your earnest money deposit. Basic contract law dictates that you are exposed to the difference between what the seller would have realized from your purchase and what the seller actually realized after the default. This is often far more than the earnest money deposit.

There are legal ways to terminate a contract without defaulting. I strongly suggest you speak to a real estate attorney to review your options.

• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to tom@thomasresnicklaw.com or call (847) 359-8983.