Everything You Were Told About Filing for “Homestead” at Closing But Forgot 3 (or 11) Months Later
[Editor’s Note: this post originally ran (late) last November. On the theory that that might be cutting it close for some folks, I’ve moved up the date — a bit — this year.]
If you bought a home earlier this year in Minnesota, you have until December 1 to file for homestead status.
If you’re closing between Dec. 1 and Dec. 15, the deadline is Dec. 15.
What is “homestead,” and why claim it?
Basically, “homestead” is a legal status that indicates that the home is your principal residence.
Like “domicile” — which state you call home — you can only homestead one residence (unless you are a certain New York Congressman who sits on powerful tax-writing committees).
Homestead Benefits
There are two reasons to file for homestead status (three if you’re contemplating selling your home):
One. At least in Minnesota, homestead status translates into lower property taxes.
The gap between homestead and non-homestead (investor) status was narrowed significantly years ago, but the difference can still be hundreds of dollars a year (more on an upper bracket home).
Two. Lower insurance premiums.
Insurers typically charge lower rates for principal residences than for second homes or investor properties.
Three. If you’re selling your home, the Buyer may ask you to reimburse them the difference between homestead and non-homestead status.
In fact, Minnesota’s standard Purchase Agreement includes a section — complete with a blank line — making it easy for Buyers to request that.
Logistics
The government discourages it, but I always recommend that new homeowners file for homestead status in person — ideally, just after closing while everything’s still fresh.
Besides valid ID, the two documents new homeowners need to have with are the deed, and the Certificate of Real Estate Value (both provided at or just after closing).
Last tip: as Buyers are invariably coached (but forget) at closing, the answer to the question, “Do you currently reside at the address?” is “Yes” (some Buyers delay moving in while they do fix-up).
