What is the best way to handle Roll Back Taxes in the event of a listing and event of a sale?

Most Buyers do not want to pay for the Sellers benefits! Most Sellers do not want to pay for the Buyers change of use! Suggestions on handling this upfront and when a sale occurs.
In General Area - Asked by Michael G. - Nov 4, 2013
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Patrick K.
Broker/Agent
Cypress, TX

First and foremost Roll back taxes are negotiable. Second...the Seller has enjoyed a lower tax rate, paid less taxes (bet he held the money back knowing they would come due?) and had the benefit of that cash flow for X years. The buyer is not going to pay full list price for the land? and further compensate the seller yet again. I disagree with the phrase "pay for the buyers change of use" as they aren't, they are paying the roll back taxes they knew would come due at some point. What the buyer does is irrelevant to the Seller as the buyer will be paying a fully assessed tax rate according to the new value. How much in roll back taxes are involved? The seller appears to not know what's involved in the sale...Do they want the buyer to pay their capital gains taxes too?

Dec 3, 2013
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Cheryl Rivera S.
Owner/Investor
Dallas, TX

My colleague is correct. As with any charge, tax, or cost of closing, the payment of these taxes is negotiable, but often it is a Seller charge because the Seller has enjoyed the benefit of very low taxes for the past five years. Rollback taxes do not occur until the use of the property changes, so if the Buyer continues to use the property for agricultural purposes, there is no need to trigger payment of those taxes and the exemption just rolls forward! The new owner would need to immediately apply for the exemption after purchase. Rollback taxes can be triggered in whole or in part, so depending on anticipated use, it may be wise to get professional advice as to the strategy for handling these taxes.

Jan 6, 2014
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