Don’t be blindsided when buying a home and make sure you’ve learned all you need to know about the home buying process. If you’re not well informed, you may be hit by a rollback tax which can cost you thousands of dollars. But no need to fear, we are here to explain what you need to know. So what are rollback taxes? This tax happens when a property that was getting a special tax exemption for specific uses such as agriculture, ranching, or wildlife, loses that special status when it changes hands and the buyer does not continue that activity.

The county has given the previous owners a special discount for many years plus interest, but if the new buyer isn’t using the property in the same way, say, for agricultural use, then that discount will no longer apply. The county will request that the new buyer pay back the money that the seller has saved with this discount. If you don’t protect yourself as the buyer, you could be stuck paying the rollback tax which can cost tens of thousands of dollars - and it can be completely unexpected because it wasn’t handled before closing. 

So here’s what you can do to protect yourself from rollback taxes - have your realtor negotiate rollback taxes when you make the offer. Get it in writing that the seller covers any rollback taxes that are triggered in closing. As a third precaution before you close in an auction period, check the land special status at the county to find out what exceptions the seller is getting, and see how you can continue those exemptions if you want to do so. Be smarter than 90% of buyers and get with your realtor to talk about rollback taxes before closing.