3 Frequently Asked Questions – Real Estate Closings
1. Where Does the Closing Occur?
The location selected for closing should accommodate all necessary parties. Standard I of the FAR/Bar Contract states that the closing is to be held in the county where the real property is located, and further provides that the physical location of the closing is to be the office of the attorney or other closing agent designated by the party who pays for the title insurance, or, if no title insurance is obtained, the location designated by the seller. The closing agent should ensure that a notary and two witnesses are available.
2. How Are Real Estate Taxes Prorated At the Closing?
Real property taxes are paid in arrears (meaning at the end of the year) in Florida and are not assessed until November of the year for which they are due. Therefore, when a closing takes place between January and the first week in November, the amount of the current years property taxes are unknown. As a result, the parties base the tax proration on the prior year’s amount. When the tax bill is finally received, the parties should re-prorate the taxes if necessary. At closing, the parties usually sign a re-proration Agreement agreeing to re-calculate the taxes owed. At closing, it is customary to use the maximum allowable discount when prorating taxes.
Note: If the home’s assessed value has been artificially suppressed under the “Save-Our-Homes” amendment to the Florida Constitution, the buyer can expect a large jump in ad valorem taxes within two years. The buyer should contact the local tax assessor before closing for an estimate of their new tax obligation.
3. What is the Florida Homestead Exemption and When Should I Apply?
Article VII 6, of the Florida Constitution and F.S. 196.031 contain what is known as the homestead exemption. It provides that $50,000 of the value of homestead will be exempt from property taxes, which results in the $50,000 being subtracted from the assessed value of the home for purposes of calculating ad valorem taxes due on the property. A new homeowner must apply to the tax assessor’s office to obtain this exemption. Also, because of the “portability” provision in a 2008 amendment to the Florida constitution, a homesteaded owner may now move up to $500,000.00 of tax exemption from one Florida home to the next.
A new home owner should call the local tax assessor’s office to find out when to apply for the homestead exemption. Frequently, the filing dates are between January 1 and April 1 of the first full year of the client’s ownership, meaning the new owner must own the home on January 1 for the year that they are filing for the exemption. Late filing will result in a loss of the exemption for that year.
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