Changes to Michigan’s Principal Residence Exemption Act!

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The Principal Residence Exemption (PRE) filing dates have changed!  And it’s appropriate to say – finally!!!

The governor has signed the bill extending the filing dates for the PRE to June 1st.  This gives home buyers another month to close on the purchase of their home, and file the application for this exemption which works as a “credit” on your taxes – nearly a 40% savings, in some cases! – on the winter or summer tax bill depending on when the school operating taxes are collected.

In addition to the extension of the filing date – there has been a second filing date enacted.  Until now, you were only eligible to file for this tax credit once a year.  That means if you closed on the purchase of a home you intended to use as your primary residence after May 1st, you had to pay the school operating taxes that year.  The second portion of the bill allows for another filing date before the Winter tax bills come out:  November 1st.  This allows the home purchaser the PRE to be applied to the Winter tax bill, in the event that is when the school tax is collected.  This collection date varies county to county – if you are not working with me – be sure and ask your REALTOR this question!

This will be a GREAT benefit to anyone buying a foreclosed home that has lost it’s exemption because it is no longer anyone’s primary residence.   This has caused troubles for many a Buyer.  When you purchase a home, you are required to reimburse the current owner for any pre-paid taxes.  In Washtenaw and Livingston counties, for example, taxes are paid in advance (so the summer tax bill payable July 1st will cover you from July 2012 through July 2013).    Lenders are required to qualify you for a mortgage based on the home purchase price, PLUS the cost of taxes broken down to a monthly amount.  You can imagine if the taxes are at the full rate that reduces your purchasing power – the amount of money you can spend on the house itself!

In addition to that – it means you have to bring significantly more cash to the closing table, as reimbursement of the pre-paid taxes to the seller are part of what is called “closing costs”.

Although there is the option of the Conditional Rescission of the Principal Residence Exemption Act in place now, the seller has to have filed this request to the State of Michigan.

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