Tax Prorations and Escrows: A Lincoln Square Buyer’s Guide

Buying in Lincoln Square and trying to pin down your cash to close? Two quiet line items can shift your bottom line: tax prorations at closing and the lender’s escrow account. It is normal to feel unsure about how they work together, especially with Cook County’s payment timing and exemptions. In this guide, you will learn how prorations are calculated, what your lender will collect for escrow, and how to negotiate the details so you are not surprised at the closing table. Let’s dive in.

Cook County property taxes, simplified

Cook County property taxes come from two parts working together: an assessed value and tax rates set by local taxing districts. Your bill can include the city, schools, parks, libraries, and other districts on one statement. The Assessor values the property and processes exemptions, while the Treasurer issues the bills and accepts payments.

Because of the billing schedule, taxes are often effectively paid in arrears for periods you already lived through. That timing is why prorations are needed when a property changes hands. At closing, the goal is to split the current tax year’s bill between seller and buyer based on how long each owned the home during that year.

Exemptions like homeowner, senior, or disability-related exemptions can reduce taxable value if you live in the property as your primary residence. These exemptions must be applied for and maintained. They do not always carry over automatically when you buy, so plan to confirm and file after closing if you qualify.

Your bill can also include special service areas (SSAs), special assessments, or other charges. Any unpaid prior-year taxes and penalties can become liens that must be cleared before you take title.

How tax prorations work at closing

What prorations do

A tax proration is a settlement adjustment that allocates the current tax year’s bill between the seller and you. Each party pays their share for the days they owned the property during the tax period that includes the closing date.

Common bases and timing

Most Chicago contracts use a per diem method. The title company or attorneys use the most recent full tax bill as the starting point. If the full bill is not yet available, they often annualize the latest installment or use last year’s total. Contract language controls through which day the seller pays, so be sure the clause matches your intent.

The per diem formula

• Daily tax rate = annual tax amount ÷ number of days in the tax period (often 365, sometimes 360 per contract).
• Seller’s share = daily rate × number of days the seller owned in the tax period through the agreed cut-off date.
• Your share = annual tax amount − seller’s share.

Example, illustrative only: If the annual tax is $6,000, the daily rate is about $16.44. If the seller owned 120 days of the tax year through closing, the seller’s share is about $1,972. You receive that amount as a credit on your closing statement.

When the bill is not issued yet

If the current year’s bill is not out, the parties still prorate using the most recent reliable number. Title companies also hold back funds or require credits to cover unpaid items. If the final bill changes materially from the estimate, contracts often allow a post-closing adjustment.

Contract language you can use

Consider asking your agent or attorney to include clear proration terms. Examples you might see in Chicago contracts:

• “Real estate taxes to be prorated through the date of closing on a per diem basis based on the most recent available tax bill or, if none available, an annualized estimate.”
• “Seller to pay any delinquent prior-year taxes and clear all tax liens at or before closing.”
• “If final tax figures differ materially from the proration, parties agree to adjust post-closing per standard practice.”

Escrows and your cash to close

What an escrow account is

If you finance your purchase, your lender may require an escrow account for property taxes and homeowners insurance. You pay a portion of these costs each month with your mortgage payment. The lender then pays the bills when they come due.

Initial escrow deposit at closing

Lenders typically collect an initial deposit at closing to fund your escrow until the first disbursement date. The deposit usually includes a cushion plus the partial months between closing and the next scheduled tax or insurance payment. Under federal RESPA rules, the cushion the lender holds is generally capped at the equivalent of two months of escrowed disbursements, subject to investor or program requirements.

Your monthly escrow amount

A simple estimate is: annual property tax plus annual homeowners insurance, divided by 12. If taxes rise and the account runs short during the lender’s annual escrow analysis, your lender may ask for a lump-sum payment, increase your monthly escrow amount, or a mix of both.

Who requires escrow

Many lenders require escrow when you put less than 20 percent down or per investor rules such as conventional, FHA, or VA programs. Some allow waivers in limited cases. Ask your lender early so you can plan for both the initial deposit and the monthly payment.

Lincoln Square buyer checklist

Local items to verify

• Check if the property sits within a special service area or has any special assessments that appear on the tax bill.
• Confirm whether the home is a condominium or single-family. Condo association assessments are separate from property taxes and affect your monthly housing budget.
• Verify whether a homeowner exemption is active and whether you will qualify after closing.

Documents to request

• The most recent property tax bill showing installments, exemptions, and any special charges.
• A tax certificate or title commitment from the title company showing any unpaid taxes or tax liens.
• Your lender’s Initial Escrow Disclosure that lists the initial escrow deposit and your estimated monthly escrow.
• Any notices of pending special assessments or improvement projects from local districts.

Negotiation tips

• Specify the proration method in the contract. Ask to use the most recent full bill or a stated estimate to avoid confusion.
• Require the seller to clear any delinquent or prior-year taxes and remove tax liens before or at closing.
• If the seller has a pending assessment appeal that could change taxes, discuss a seller credit or escrow holdback to cover potential shifts.
• When taxes are uncertain, consider a conservative estimate for prorations. Sellers may prefer a lower number; put your agreed method in writing.

Cash-to-close worksheet

Use this step-by-step approach to avoid surprises:

1. Confirm purchase price and your down payment amount.
2. Ask your lender for estimated lender fees, prepaid interest, and any mortgage insurance.
3. Request the Initial Escrow Disclosure for the required deposit and monthly escrow.
4. Get the latest tax bill and have the title company compute the proration per your contract.
5. Add estimated title charges and other closing costs. Ask for a preliminary closing estimate.
6. Add any condo or HOA fees, such as move-in or transfer charges, if applicable.
7. Sum everything to estimate your cash to close, then include a small buffer for post-closing adjustments.

Illustrative example: Purchase price $500,000 with 20 percent down is a $100,000 down payment. Last annual tax is $6,000, daily rate about $16.44. If the seller owned 120 days, you receive about a $1,972 seller credit. Your lender requires a $1,500 initial escrow deposit that includes partial months and a cushion. Your cash to close equals down payment plus closing costs and prepaids plus initial escrow, minus the seller credit.

Avoid common pitfalls

• Skipping the proration clause. Without clear terms, you risk disputes when the final bill arrives.
• Mixing up escrow and prorations. Prorations settle past and current obligations between you and the seller. Escrow funds future bills the lender will pay.
• Overlooking special assessments. Some assessments run for multiple years and can appear as separate line items or liens.
• Assuming exemptions transfer by default. Apply for any exemptions you qualify for after closing.

Work with a local advocate

A smooth Lincoln Square closing comes from coordination between your lender, your title company, and your agent. The right partner will help you lock in clear proration language, confirm unpaid taxes, and align escrow estimates with your timeline, so your cash-to-close number is accurate and stress free. If you want a precise plan tailored to your address and closing date, let’s talk.

Ready to estimate your cash to close with confidence? Book a Consultation with Unknown Company and get a step-by-step plan from contract to keys.

FAQs

What are property tax prorations in Cook County?

• A proration is a closing adjustment that splits the current tax year’s bill between seller and buyer based on ownership days, so each pays their fair share.

How are tax prorations calculated at a Lincoln Square closing?

• Most use a per diem method based on the most recent full tax bill or an annualized estimate, with the contract controlling the exact cutoff date and calculation.

What is a lender escrow account for taxes and insurance?

• It is an account your lender manages to collect monthly portions of tax and insurance, then pays those bills on your behalf when due.

How much will my lender collect for the initial escrow deposit?

• The initial deposit typically includes a cushion plus the months needed to fund the first tax or insurance payment, with the cushion generally capped at two months under federal rules.

Who pays unpaid prior-year taxes at closing?

• Sellers are typically required to pay any delinquent prior-year taxes and clear tax liens before or at closing so you receive marketable title.

What if the final tax bill is higher than our closing estimate?

• Your contract governs. Many agreements allow for a post-closing adjustment if the final bill differs materially from the proration used at closing.

Do exemptions like the homeowner exemption affect my taxes right away?

• Exemptions can reduce taxable value, but they must be applied for and maintained. They may not carry over automatically when you buy, so plan to file after closing if eligible.