Can My Daughter File a Homestead Exemption on Property Purchased via a Contract for Deed Agreement?
Many individuals are turning to contract for deed agreements as a way to purchase property, often referred to as a rent-to-own arrangement. These agreements are characterized by paying a higher than market value rent with a large deposit, while still owning the property and aiming to eventually pay off the remaining balance and close the transaction.
Understanding a Contract for Deed Agreement
A contract for deed agreement is legally binding, setting forth the terms and conditions under which the deed of the property will be transferred to the buyer. Typically, the buyer pays higher than normal rent and a significant deposit, with the hope of qualifying for a mortgage and completing the purchase.
However, the downside is that if the buyer fails to meet the terms, they may lose the deposit and the rights to the property. As a result, the title remains with the seller until the buyer has paid off the total amount, making them effectively a renter with ownership rights until the full purchase is made.
The Role of a Homestead Exemption
A homestead exemption is a crucial piece of real estate tax legislation that provides a certain level of protection to homeowners. It allows eligible homeowners to receive a reduction in their property taxes, often based on the primary residence. While this exemption is primarily designed for homeowners, there are situations where a buyer under a contract for deed might try to claim the homestead exemption.
Eligibility for Homestead Exemption under a Contract for Deed
Given the nature of a contract for deed, whether your daughter can file for a homestead exemption can be complicated. Typically, a contract for deed agreement is more akin to a lease agreement, where the seller retains the title until the buyer has fully paid off the property. This means that during this period, your daughter lacks full ownership and might not automatically qualify for the homestead exemption.
Nonetheless, if your daughter is actively seeking to claim the homestead exemption, it is worth pursuing. You need to ensure that the contract for deed allows for the recording of the deed in the land records office and that your daughter is responsible for all property taxes.