Are you a new homeowner and getting mail to the house regarding Homesteading or Exemption's? The letters are enticing, save $7000 on your property tax or save up to $175,000 in equity. Are you wondering if these are scams... They technically are not a scam. Exemptions are available in the state of California. However the letter you are receiving may be, because you do not have to pay a 3rd party to have this exemption in California.
Property Tax (Homeowner's Exemption). A homeowners exemption is just a property tax exemption, provided under the California State Constitution. It is an exemption of up to $7000 in assessed value from property tax assessment of any property owned and occupied as your principle property. It removes $70 from your annual property tax bill.
There is no reason not to file this exemption. You will receive a notice directly from the county approximately 90 days after you purchase a home. Here is a link to the county website with Frequently Asked Questions, in case you don't get your form directly from the county. One thing to keep in mind is if you refinance or move property out of a trust you will need to re-file, but other than that you only need to file once.
Below is an explanation of the two types of Homestead
Homestead Exemption: This is entirely different and is used to protect some of a homeowners equity in your home during a bankruptcy and a forced sale of your property. There are two types of Homestead Exemptions. The first is an automatic. No action is required by the homeowner to create this type of exemption, you are all ready covered in California. The second homestead is created when a property owner records a declaration of homestead with the county recorder to save some of their equity when they voluntarily sale their property from judicial liens.
The difference between the two is that the declared homestead provides equity protection upon a voluntary sale of the property by the owner. If no declared homestead is recorded than proceeds from a voluntary sale can possibly go to creditors.
The amount of equity saved varies depending on your age, material status, etc.
So why are you getting letters from private firms. Because they want to make money from you to process this filing for you. In California these companies do have regulations they must follow. This is unnecessary because you are automatically covered unless you sale your home voluntary during a bankruptcy proceeding. At that point you can simple file a declaration with the county recorder yourself or I would hope your attorney can help you.
These letters that are received are mis-leading. You will want to be careful as to where they are coming from. For example the form to the left, came with a official envelope noting Real Estate Closing Documents. Inside included a copy of the owners grant deed. Clue, it is coming from an entirely different county. It looks official, but it is not.
I would have to say out of all the home buyers I have represented I have pretty much got a call from each asking should I fill this out. The answer is no!!!
To recap a homeowner's exemption is a property tax exemption. Once you buy a house and your grant deed is recorded you will get a form directly from the county for your exemption.
A homestead exemption is a bankruptcy exemption and only used to protect a portion of the homeowners equity if necessary, but only required if a homeowner voluntarily sales their home.
Of course if you have any legal questions, make sure to speak with an Attorney.
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