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This is common for homeowners who purchase a property to give the seller time to move out. This period after the closing until the buyer gains possession is called the lease-back period. If the seller wants a couple of weeks to move out, a buyer can agreed to a sell-leaseback. But buyers should use extreme caution if the closing is to take place in the later part of December. The new owner will own the property January 1st, but may not occupy the property January 1st (the prior owner is leasing it until some time in January in this example). Because the new owner cannot prove they occupied the property on January 1st, they will be denied the homestead exemption.

A possible way to avoid this

If the seller has a homestead exemption on the property, and they had waited to close on the property until January 2nd, the prior owner would have still qualified for a homestead exemption on the property on Jan 1 (owned and occupied). The homestead exemption would have then carried over for the new year and the new owner would benefit from it. Then the buyers would claim their own Homestead Exemption the following year. So waiting until January 2nd to close on a property that is the seller's homestead is a completely legitimate and legal technique to ensure a homestead exemption stays on the property.

But what if the seller does not have a homestead exemption in place?? Do you see the yellow flags flapping?? If the closing takes place in December with a leaseback into January, the buyer will own the property but not occupy it as of Jan 1. So no homestead exemption that year. The tax dollars lost by not having a homestead exemption varies by location but it would not be unusual for the difference in the taxes to be a few hundred dollars!


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