Florida Tax Deed: Strategies with Homestead Exemption

tax-deedFlorida Tax Deed: The homestead exemption can be a great Tax Deed strategy that any homeowner who lives in that home as his primary residence can apply for.  It is something that is allowed in many states however in Florida specifically it will affect your investing strategies.

 

Let me explain what it does in Florida,  it gives the primary residence homeowner an exemption of an amount of 25K to 50K off of the assessed value of their house when it comes time to pay taxes.  For instance, if a person owns a house that is assessed for 100K, they will get taxed on 75K or 50K depending on what the exemption amount is.  This does not bring the value of the house down.  The house will have fewer taxes to be paid on the property taxes when the taxes are due.  It is a great tax break for those who are living in the home as their primary residence.  Now where this comes into play with an investor like you is the amount that you pay when the two year redemption period is over and it is time to apply for a deed.  This is the completion of the process in order for a house to become a Florida Tax Deed and for a tax lien certificate holder to get their initial investment plus interest back.  At the time that the Florida Tax Deed application is accepted the tax lien holder must pay half of the assessed value of the home plus the fee for the application, which usually runs about 200-250 dollars.  At this time the tax lien holder will begin to accrue 1 ½ % per month on the amount that it cost to take it through this process.  So that would be half of the assessed value of the house and the amount of the application.  The total amount of the tax lien certificates for the two years or however many years of tax certificates are owned plus the application fee plus half of the assessed value of the house will be the opening bid for theauction.

     This is the reason why you see a different price on a Florida Tax Deed and its opening bid.  Some will start out at the back taxes plus the Florida Tax Deed application fee and others will start out at the back taxes, the application fee and half of the assessed value of the house.   Here is where another big difference comes into play.  Perhaps you go to the auction of a house that has a homestead exemption on it.  What if no one bids on the property?  Then the house becomes the property of the person who took it through the process.  In other words if you are the person that paid for half of the assessed value of the homestead exempted property plus the back taxes (being the tax certificate holder for two years) and theapplication fee and no one bids on the property then it becomes yours.  You have now purchased the property for approximately half cost of the assessed value of the house.  This can be a good way to own properties providing that they are in a good market and can be turned quickly.

{ 1 comment… read it below or add one }

Ray Gustafson August 19, 2012 at 1:28 pm

Who gets the "half of assessed value" in this process? Does the count keep it?

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