Before you make the life-changing decision to purchase a home in Alabama, it’s a good idea to get familiar with the rules for homebuyers and sellers in the state.
Home seller and buyer laws
Real estate property disclosure forms: Alabama is a caveat emptor state, which means “buyer beware” — the state puts the impetus on the buyer to fully inspect the property and limits sellers’ duties to disclose defects in the home. There are three exceptions to this, however: if a defect causes a direct threat to health or safety; if there’s a fiduciary relationship (such as adviser or counselor) between the parties; and if a buyer asks the seller a question regarding specific defects.
Judicial or non-judicial foreclosure state: In Alabama, a foreclosure can be initiated by both judicial and non-judicial means, depending on whether a “power of sale” clause — in which a buyer pre-authorizes a sale of the property if they default on their loan — exists in the mortgage agreement. If a “power of sale” clause exists, a non-judicial foreclosure can be implemented after running a notice of sale in a local paper once a week for four weeks. Thirty days must pass after the final notice of sale runs before the sale can take place. If there’s no such clause, the lender may file a lawsuit to foreclose or sell to the highest bidder after filing four notices of sale in consecutive weeks.
Community property state or equitable distribution: Alabama is an “equitable distribution” state, meaning that, upon divorce, property is split based on a number of factors, including earning power of the spouses, duration of the marriage and reasons for the split. These factors will affect how assets, including the home where the married couple resided, are divided.
Attorney vs. escrow state: In Alabama, a lawyer must represent the buyer, prepare all legal mortgage documents and assist with clearing title work.
Real estate transfer taxes: In Alabama, the state imposes a transfer tax at the rate of 0.1% on deeds (50 cents on each $500) and 0.15% on mortgages (15 cents on each $100). The buyer is typically responsible for this tax.
Property tax exemptions: If you are over 65 years old or permanent and totally disabled or blind (regardless of age), you are exempt from Alabama state property tax, although county taxes may still be due. Homestead exemptions of up to $4,000 are allowed for those under 65 with no disabilities. Properties must be single-family, primary residences to qualify for homestead exemptions.
Typical property taxes: Alabama has the second-lowest median property tax rate in the country — homeowners occupying a house worth the state’s median value of $119,600 pay $398 each year in property taxes, according to Tax-Rates.org. Alabama counties collect 0.33% of a property’s assessed value in property taxes, on average. Shelby County, in the Birmingham metropolitan area, collects the most property tax, an average of $905 annually.
Conforming loan limits
The conforming loan limit, which is the maximum loan amount set for government-sponsored enterprises Fannie Mae and Freddie Mac to acquire a mortgage, is $484,350 for every county in Alabama in 2019. Each year, the Federal Housing Finance Agency (FHFA) sets the conforming loan limits.