Metro Detroit Real Estate Homes For Sale

The following two scenarios with buyers prompted me to attend a seminar on Michigan Property Tax Appeal to find some answers about tax assessing and how to appeal property taxes on residential homes.  Last year I had a home owner (not selling their home) approach me for market comparatives as they wanted to appeal their taxes.  So this affects home owners as well as buyers. Even in a declining market, home owners may see an increase in property taxes this year.  In Michigan, taxable value increases by the rate of inflation or 5% - whichever is lower.  Seller's who have a gap between taxable value and SEV should note there will be a 4.4% increase in property taxes based on this year's Consumer Price Index (rate of inflation). 

I have two buyers who have different concerns about taxes as they proceed to buy a home in a decreasing market.  The first couple is considering a home with a State Equalized Value (SEV) of $288,000 so technically the state of Michigan says the home is valued at $576,000 (2 x SEV).  It is a foreclosure with a purchase price of $259,000.  So a full price purchase is less than half the state value of $576,000.  The home is definitely over valued and the question my buyers asked:  will the city assessor adjust to the actual purchase price?  They would buy the home but can't afford the current taxes. 

The second couple is a first time buyer who found a home with a taxable value of $110,800 & SEV of $166,300 and the list price is $179,000.  The taxable value (x2) would indicate the home is being taxed at $221,600 which would be fair as the home is currently priced low and may sell closer to $200,000.  However, will the city uncap the taxes to SEV as is standard with a purchase?  Meaning, the new owners would pay taxes on a home that is valued at $332,600 and purchased for less than $200,000?  They can afford the current taxes but can't buy it they reset to the higher amount.

 Buyers (particularly first time buyers) should ask their agent a lot of questions about what taxes will be when purchasing a new home as one of the above scenarios will most likely apply.  Typically, property taxes are adjusted when a buyer files the "transfer of ownership" form with the city within 2 weeks after closing-this "uncaps" the home and sets it to the current SEV.  In a normal market where home prices are stable or increasing, SEV would be an accurate figure on which to base taxes.  However, even in a normal market, if a seller has owned a home for a long time, there can be a significant gap in taxable and equalized value and it will always be uncapped and reset to SEV.  In a declining market this still happens so here is a brief Webcast explaining why property taxes may go up while values are going down Property Tax Explanation. 

While I have seen many cities adjusting taxes downward from 2007 to 2008 and expect the same for 2009, this adjustment is an across the board decrease based on many factors and is not reflective of the true market value of homes in the existing economic crisis.  If you think about it, cities would go broke if they adjusted to current prices.  Whether you are a buyer or home owner, the only recourse is to appeal property taxes with the city.  Here are important dates to note for Michigan residential homes: 

1. December 31, 2008 is the day for 2009 assessments and 2009 property taxes.  It is the "this is not a bill" statement of taxes.
2. February 20, 2009 - deadline for taxpayer filing of personal property statement.  Your current statement may not accurately reflect sq. ft. or classification etc.
3. Tuesday following the first Monday in March is the first meeting of township Board of Review (check with local municipality for City review).
4. July 31, 2008 - Deadline to the residential appeals to the Michigan Tax Tribunal (must have protested at March Board of Review) 

The following items are the best documents to bring for an appeal:  comparable sales, appraisal and a mortgage appraisal (tends to be higher).  If you have an accepted offer on a home before these dates, you can file an appeal to have the taxes adjusted in the current year - otherwise the taxes will be based on SEV (including whatever decrease the city is assigning across the board).  The window of opportunity is very short and there are no guarantees so you could end up paying twice the amount of taxes on a home as outlined in scenario one.

 If you buy a home where the taxes are lower (scenario tow) and are about to be uncapped, you can expect it to be reset to SEV and pay much higher taxes than the current owner.  However, if you file "transfer of ownership" document after May 1, the city will use the current taxable value for summer taxes and it will uncap for the following tax bill.  They will still increase taxes for the rate of inflation on the current taxable value but you will have the opportunity to appeal before the SEV is uncapped for summer taxes.  Again, there is no guarantee that your appeal will be successful and there is the definite possibility that you will be paying higher taxes. 

A couple of other things that I found out about in the Michigan property tax appeal seminar are as follows.  Most people do not appeal their taxes and there is also a good chance that they will adjust but the predictable outcome is that the difference will be split.  It may not be worth the time and effort - particularly for homeowners being adjusted for the rate of inflation when the time and cost of an appeal is considered.  I found this basic calculation:  every $10,000 reduction in taxable value equates to $440/year in less taxes. 

The members of the Board of Review are volunteers from your neighborhood who review the assessment roll on behalf of city residents. The size, composition, and manner of appointment of the Board of Review are prescribed by the City Charter.  You don't want to come with an attitude--your time is too short. You have about 5 minutes to state your case.  You will want to have your documents organized so that you are brief and precise in your presentation.  There are levels of certification/qualification of appraisers so you want to choose wisely when getting an appraisal.  A Certified Residential Real Estate Appraiser is the best bet compared to a State Licensed Real Estate Appraiser.

 If you are a home owner or buyer, feel free to contact me with any questions regarding property taxes and the appeal process.  If I don't have the answer, I will research it and to find out the information. 

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Oakland County Realtor selling Real Estate in Southeastern Michigan.  TishHouse sells Houses - selling Oakland County Real Estate with RE/MAX Showcase Homes in Birmingham, Michigan. Helping People in a challenging market by specializing in Short Sales. See what my clients have to say about my extraordinary customer service.  Follow me on Twitter.