Buying property across three states on Pickwick Lake

The short version: Pickwick Lake sits in three states, and the same lake house can cost you noticeably different amounts in taxes and come with different protections depending on which side of the line it is on. The biggest surprise for most buyers is property tax on a second home in Alabama and Mississippi.

Who runs the closing

Tennessee: a title company or a real estate attorney, as a neutral third party. An attorney is common but not required by law.
Mississippi: attorneys or title companies, and many Mississippi title companies are attorney-owned.
Alabama: Alabama law bars title companies from preparing deeds and mortgages, so an attorney prepares the closing documents. Expect an attorney-run closing.

Taxes paid at closing

TennesseeTransfer tax of $0.37 per $100 of price; the statute puts it on the buyer unless the contract says otherwise. Mortgage tax of 11.5 cents per $100 over the first $2,000.

MississippiNo state transfer tax. You pay the chancery clerk's recording fees only.

AlabamaDeed tax of $0.50 per $500 of value, plus mortgage tax of $0.15 per $100 borrowed.

Property tax: the second-home catch

Each state taxes a share of a property's value, and that share depends on whether you live there.

Alabama: an owner-occupied single-family home is Class III, assessed at 10 percent of value. A second home or rental is Class II, assessed at 20 percent. The same lake house pays roughly double the property tax if it is not your primary residence, and the homestead exemption only applies to your principal residence.
Mississippi: an owner-occupied home is Class I, assessed at 10 percent. Everything else is Class II, assessed at 15 percent. Homestead exemption requires the home to be your primary residence, applied for with the county tax assessor between January 1 and April 1.
Tennessee: residential and farm property is assessed at 25 percent whether you live there or not. There is no separate second-home ratio.

None of the three states charges out-of-state owners a higher rate as such; the difference comes from owner occupancy. Ask the county office for last year's bill and what it would be without a homestead exemption.

What the seller has to tell you

Tennessee: the Residential Property Condition Disclosure Act requires a disclosure statement on most sales of homes with one to four units, with exemptions for new construction, family transfers, auctions and owners who have not lived there in three years.
Mississippi: a Property Condition Disclosure Statement is required on one- to four-unit homes when a licensed agent is involved.
Alabama: a "buyer beware" state. There is no required disclosure form. Sellers must answer direct questions truthfully and disclose known defects that affect health or safety, but otherwise the inspection is on you.

Vacant land is outside the disclosure laws in all three states. Mississippi's law expressly exempts land with no dwelling, Tennessee's only covers property with dwelling units, and Alabama has no form at all. On land, your protection is your own due diligence: a survey, a septic evaluation and a title search.

Rollback taxes and leased land

Tennessee greenbelt: if the land was in the agricultural or forest "greenbelt" program, taking it out triggers rollback taxes for the previous three years (five for open space). The seller is generally liable at sale unless the contract shifts it, and the rollback is a lien on the land. Ask whether the parcel is in greenbelt.
Alabama current use: land valued at "current use" that changes to a non-qualifying use within two years of sale is re-taxed for the prior three years at the higher of sale price or market value, and the owner of record on the following October 1 pays. That can be the buyer.
Mississippi leased land: some land in Mississippi is held by the state or a school board and leased rather than sold. Check whether the deed conveys the land itself (fee simple) or a lease.

If you plan to rent it out

Short-term rentals are taxed in all three states. Alabama charges a state lodgings tax on stays under 180 days plus local lodging taxes. Tennessee applies sales tax and local occupancy tax, which booking platforms collect for stays booked through them. Mississippi applies sales tax to rentals under 90 days. Check county and city rules too, which can change quickly.

Where to start

Hardin County, TN: Property Assessor, 731-925-9031.
Tishomingo County, MS: Tax Assessor, 1008 Highway 25 South, Iuka, 662-423-7059.
Lauderdale County, AL: Revenue Commissioner, 256-760-5785.
Colbert County, AL: Revenue Commissioner, 201 North Main Street, Tuscumbia, 256-386-8530.

This guide is general information, not legal or tax advice. Laws and rates change. Rely on the county office, a local closing attorney and a tax professional for a specific purchase.

Buying across three states