I’ve ran into a problem with the taxing authority “coming after” people claiming a homestead when they didn’t occupy the property TWO times in the last 6 months. So IT DOES HAPPEN!
The most recent incident happened a few months ago I was purchasing a rehab and the title company found out that the seller had been leasing the property for 2 1/2 years. They pulled her name up on the tax records and she had 2 houses with homestead exemptions. This resulted in approximately $2500 in back taxes, penalties and interest that had to be paid at closing. The seller refused to pay it - I didn’t want to pay it …
Sure, maybe the title company will never find out and maybe the taxing authority will never find out (it’s kinda like your plan for not turning on the water)But the point is that the property is no longer occupied by the seller thus the homestead is considered void by the taxing authority - and IF they DO find out - SOMEBODY will have to pay the back taxes when the property actually sells - whether the buyer refinances or exercises their option. I just want to CMA so I don’t have to be that somebody.
When you lease option or take title to a property subject to an existing mortgage, how should you handle the change in homestead exemption?
If you do nothing, then when it’s time to sell and the title company discovers that the “original owner” has not occupied the property but has been claiming a homestead - there will be back taxes PLUS penalties and interest for SOMEONE to pay.
Of course, the title company may not discover that it was not occupied by the “owner” …
But, I’d rather deal with the problem going INTO the deal than deal with uncertainties and possible problems at closing.
I would not worry about the taxing authority coming after anyone because the wrong exemption was on the property. If you make the "subject to’ effective on the 2nd of January then you would get that tax status for the whole year. If you have someone buy on contract you can have the tax office recognize the buyers as homestead for tax purposes.
I was over at the Legrand Group seminar this morning and was talking to J.L Moore and Jack Williamson (seasoned investors). None of us have ever heard of the tax district claiming additional taxes because they had the wrong exemption on the property.