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What’s the first thing you should do after you sell your house? Get your money back!

The first thing you should do after you sell any real estate is…Get your money back!

Most sellers have a mortgage on their property, whether it is their own home or investment property, that escrows for property taxes and insurance. While all sellers of real estate are credited at closing for prepaid taxes (in New Orleans taxes are paid in advance, not in arrears), as a seller you are due a refund from your mortgage escrow account for next years taxes and insurance that are often included in your monthly mortgage payment. Louisiana state law requires that this refund is delivered to you within 30 days of closing, but I always recommend contacting your mortgage company after closing to ensure that it is on its way – mortgage companies do make mistakes. This can amount to thousands of dollars.

But you are entitled to more money. All insurance policies have a minimum earned premium, but in theory if you cancel an insurance policy on your house or investment property a prorated refund for the period not covered as a result of cancellation (the period from the point of cancellation through the end of the current policy that is in effect is) is legally yours.

This is not automatic. For example, if your insurance policy went into effect on January 1st of a given year, and was paid for by your mortgage company’s escrow department, and you sell your property on June 30th, you are entitled to a 50% refund of the annual premium. The only way to get this is to contact your insurance agent and inform them that you sold the property and you no longer need the coverage. Upon doing so, the policy can be canceled effective the date of closing, and once again this can amount to thousands of dollars.

Hope this was helpful, feel free to comment or ask any questions.

2 Responses to What’s the first thing you should do after you sell your house? Get your money back!

  1. Jerry Brown says:

    I am going to sell my investment home. I did not give the lender funds in an escrow account to pay taxes and insurance. As a result, there is no escrow account for this loan. Will I have to pay the taxes at closing to cover the part of the year in 2011 that I owned the home? The home is in TX. Thanks, Jerry b

    • Andy says:

      If property taxes are paid in your municipality in arrears, such as at the end of the year for the 12 months prior, then yes you would have to cover your portion of the year at closing. The closing attorney will prorate these for you, and they will show up on the Settlement Statement as a debit to the seller (you) and a credit to the buyer. If you are walking from the closing with cash after all debts and other obligations, the closing attorney will deduct your portion of the property taxes from your proceeds. If you are not walking away from the closing with any funds, you will have to bring a check with you to cover that amount.

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