Today, Governor Snyder signed legislation providing homebuyers a fair process when it comes to their property taxes.
Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.
Below are a few FAQ’s regarding the new law:
Does the legislation take effect this year?
Yes. The new law moves current May 1st PRE filing deadline to June 1st of this year.
How does it work?
If a homebuyer purchases a Principal Residence and closes on or before June 1st, they can take advantage of a significant tax break by filing for a Principal Residence Exemption.
When is the additional filing date?
November 1st. This allows for tax relief in those communities that still collect a portion, if not all of their non-homestead mills, on the December tax bill.
If my client buys after June 1st this year, what can they expect?
If a homebuyer purchases a home after the June 1st filing deadline, and their local tax authority collects all non-homestead mills on the spring tax bill, their property taxes may not reflect the exemption until the next tax bill. If however that local tax authority collects a portion of the non-homestead mills on the winter tax billing cycle, the homebuyer can file for a PRE before the November 1st and exempt themselves from any non-homestead mills collected on the December bill.
What about the foreclosure provisions?
Banks have the option of maintaining the home’s Principal Residence status by filing a Conditional Rescission. By maintaining this exemption status, it’s the expectation that borrowers will be able to qualify for financing on these foreclosed properties at the PRE rate and begin paying the lower rate of taxation as soon as they move into the home. To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence. It is important for those REALTORS® working with bank clients to let lenders know about the change and communicate the benefit of filing a Conditional Rescission.