Charles Jones Blog
Recent changes to the Homestead Rebate Program in New Jersey will have real estate settlement implications this year and for years to come. Rather than a check or direct deposit of their homestead rebate, recipients will now see a credit on their tax bill for the second quarter of the year following the application. While the criterion for receiving a Homestead credit is based on income qualifications of the individual owner(s), the rebate will now be distributed to the property; not the owner(s). Make sense? In other words, the credit remains with the property, not the tax payer(s), even though it was the tax payer’s income that determined the eligibility of the credit.
This credit will have little effect on closings that occur between April and December of any given year as the credit will have been applied and therefore can be adjusted at closing. The real danger in what I call the homestead blind spot are those closings occurring between November and April of the following year where credits are pending for the subject property but not yet addressed. Those Homestead applicants who receive a credit based on their income may lose out because those same credits will now go to the new owners of the properties unless the settlement agent escrows in anticipation of this unknown credit. If not addressed then applicants wanting to be reimbursed will either have to contact the purchaser of the property directly or have their settlement agent to do the same. Certainly a hassle at the very least.
Signature Information Solutions has made note of the Homestead changes since November of 2010 when the program was altered and currently reflects any applied credits on its NJ Tax Search product. The NJ State Bar Association has expressed their concern to both Treasury and Legislatures over this overhaul of the Homestead program. There certainly will be frustrated citizens who sold their homes during this homestead blind spot who will not know where to turn. This is a complex issue and one that you may want to discuss with your underwriter as it is quite possible that you may hear back from a former homeowner asking, “Where is my homestead rebate?” What do you think ?
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