Will Homestead Exemption Protect You From Forced Sale of Your Home?

So what does the term Homestead Exemption mean and how does it apply to you? A homestead generally refers to one’s owned, primary residence, and is a protection of the value or a predetermined portion of the equity in your principal dwelling place from some creditors and/or forced sale of your home. Investment properties and second homes do not quality for Homestead Exemption. In addition, a declaration of Homestead can not protect you from foreclosure by your bank as the mortgage loan is secured by the property.

Do you know what your Homestead rights are? Homestead laws vary by state and this law is one small reason why so many celebrities and prominent people choose to make their home in Florida. In Florida for instance, homestead rules are generous, protecting unlimited value, and have been extend by the courts to everything from luxury homes to mobile homes and even houseboats.

The state of Arizona is not nearly so charitable. Arizona homestead law exempts $150,000 of a person’s equity from seizure or sale of debt, and married couples may only claim one exemption. It’s important to note that the Arizona homestead exemption is automatic, meaning no prior registration or written claim is required. As of this writing, the Arizona Homestead exemption does not protect you against a claim by your Homeowners Association (HOA). Did you know that the HOA where the property is located CAN foreclose on your home? In a document published by azleg.gov, a portion of the exemption rule reads “Foreclosure (by the HOA) can be authorized in the same manner as a mortgage on real estate, but only if the owner has been delinquent in the payment of the assessment for one year or in the amount of $1,200, excluding late fees, whichever occurs first.”

What Exactly Is a Declaration of Homestead?

By Barbara Pronin

Anyone who owns and uses a home as their principal residence has a homestead. They may enjoy certain property tax benefits from this status and, in some states, homesteading can protect the owner from seizure or from losing equity due to lawsuits that result in certain judgment liens.

While state requirements vary, most eligible homeowners must file a declaration of homestead – a short form identifying the owner and naming the property as his/her principal residence – with a court or a public agency. This can generally be done by mail or in person. A recording fee may be required.

Once the document has been recorded, many states allow a portion of the assessed value of the homesteaded property to be exempt from taxation, reducing the overall value of the residence when calculating property tax. There may also be local exemptions and/or exemptions for the elderly, veterans and the disabled.

Other rules and benefits also vary by state. In California, an automatic homestead exemption applies to debtor/owners who have lived in the home continuously after a lien is filed, protecting against seizure for the lien up to a specific exemption amount whether or not a declaration form has been filed. In Vermont, homesteaded properties are granted an adjustment in property taxes if the household income is less than a specified amount.

The state may also protect homesteads, or a portion of their value, from seizure by creditors, although not covered by the homestead are tax liens and mechanic’s liens, judgments for spousal or child support, mortgage loans, or judgments recorded before the declaration of homestead was filed.

If the owner sells the homesteaded property, or at any time changes his/her principal place of residence, the homesteading status ceases to exist. Until that time, however, a title insurance policy ensures the homesteading’s priority on the property as it relates to documents of record.

Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. Reprinted with permission from RISMedia. ©2018. All rights reserved.