Even if you waive the contingency, you can still back out of the deal if there are severe defects.
What is a homestead?
For most people, owning a home gives more than just the security of a place to live. It is also a major investment that builds equity homeowners can eventually cash out by selling the property.
Early English law had a provision called “dower and curtesy” that ensured a deceased person’s spouse and children had a place to live after that person’s death.
This provision made its way to the U.S. where it still exists on the books as homestead laws. Under these laws, a person’s home — called a homestead — has a special protected status that prevents creditors from forcing the sale of the home to pay for the deceased person’s debts.
Homestead statutes vary greatly from state to state, and each one has a different definition that constitutes a home.
Houses, mobile homes and the property they occupy qualify as a homestead, but some states restrict the amount of acreage that falls under the homestead laws. In some states, condominiums, co-ops and mobile homes still qualify even if the homeowner does not own the land under or around it.
One important distinction is that the homeowner must reside in the home that’s considered a homestead and use it as a primary residence. This means homeowners may not have homestead claims in more than one state at a time, nor can they claim the protection for rental property they own.
A homestead exemption is a tax exemption or reduction that lowers the taxes that homeowners pay on their primary residences.
Since most states use a progressive-style system for property taxes, this exemption offers a greater benefit to homes with lower assessed values.
Each state has its own guidelines, detailing what properties qualify for homestead exemptions, the amount of the exemption and how to claim the tax benefits. Homeowners need to check with the local property appraisal to learn how to take advantage of homestead protection.
Homestead laws vary from state to state. For example in Texas, while you do not have to actually occupy the property to establish a homestead, you do need the right to possession of the property. Florida law stipulates that homeowners who want to claim property as a homestead must file a sworn statement that they intend to maintain the property as their permanent home. In California, residents have the option of using an automatic homestead exemption or to declare a homestead.
A homestead exemption is one way to lower your property taxes. Do you know what the other two ways are?