So you think you are paying too much in property tax. How do you know that you are? First of all, do you understand the difference between your state equalized value (SEV) and your Taxable Value? Remember you are not appealing the taxes, you are appealing the assessment the SEV. By appealing the SEV you reset the SEV and the taxable value. It should be in your best interest for years to come
Difference between SEV and Taxable Value
You SEV is determined or set when there is a change in ownership of the property. I.E. when you buy the property the SEV is "reset" by the assessor to the current SEV. The state equalized value (SEV) is 1/2 the cash value of the property. (Or market value)
The assessor usually determines what the SEV is by using comparables that have sold over a 2 year period. Just because you bought the house at $200,000 doesn't mean that the SEV will automatically be $100,000. The SEV value of the house may be above or below the purchase price. In the buyers market of 2007 & 2008 I am seeing many SEV's higher. That home with a $200,000 purchase price may have a SEV of $260,000.
After you buy your home then taxable value will become more important. There are two numbers on your tax bill. SEV and the second is taxable value. Proposal A of 1994 changed the way taxes were determined.Instead of increasing taxes based on 50% of actual cash value, commonly referred as SEV (state equalized value) now after the first year you buy a home property taxes are based on taxable value.If a property is not acquired during that tax year then the increases in taxable value are limited to the lesser of five percent or inflation.So boiling that down in English the first year you buy a home the taxes are based on SEV.The second year the taxable value is SEV plus the lesser of five percent or inflation.Remember inflation on the house can be negative so sometimes taxable value and SEV can go down.
The first year you are taxed on the SEV value and then from then on you are taxed on the taxable value. The idea of Proposal A was to limit the huge increases in property value so people would not be forced out of their home because it was worth so much. Proposal A would average out the increases in your property tax.
So after the first year the number you need to pay attention to is taxable value. That is how your taxes are determined. The taxable value times your cities millage rate will equal the amount of tax you owe. In a rising real estate market your SEV will be much larger than your taxable value. The reason for that is that taxable value can only increase the lesser of 5% or inflation where SEV is similar to the market value. In most cases if a person has lived in a home for many years the SEV will be much larger than the taxable value.
So in order to reduce your taxes you must be able to reduce your State Equalized Value (SEV) below your taxable value or it is not worth fighting for.
Fighting your taxes will take time, and maybe a little money. You have to remember the tax system and the municipalities want to keep the taxes as high as possible to keep their revenue up. So sometimes you will not win the tax fight. Sometimes the boards of review are a rubber stamp to say "NO" forcing you to take it to the next higher level. The system is set up to protect the assessment and the burden of proof is upon you. You must get the facts to change your taxes.
2 Steps in the fight of high taxes
There are 2 decision making steps in the process. 1) A local board of review 2) Michigan Tax Tribunal - exclusive place to challenge your property tax assessment
You must go to your local board of review before you go to the Michigan tax tribunal.
Time line on fighting taxes
Here is time line timeline on what happens:
February
Receive notice of assessed valuation in mail
Mid-February
In City of Detroit you must go to assessors review scheduled right away (miss this and you have to wait until next year or next scheduled review)
March
Required appearance at Board of Review (miss this and you lose out and have to wait until next year)
June 1
Deadline to receive decision from Board of review.
July 31
Deadline to file petition with Michigan tax tribunal
February next year
You should go back to board of Review
Next Yearamendment
File admendment to your petition
Next Year
Will get to go to board of review
1. So you get your tax bill and your SEV and Taxable Value is higher than what comparable homes are selling for. How do you know this? There are 2 ways. 1.) Pay for an appraisal 2.) Call or email your local Realtor and ask for comps
2. Call your municipality find out when the Board of review is. Set an appointment to save time for yourself. Otherwise you will have to wait. Sometimes it pays to call the assessor and see if you can meet with him before the board of review. You may be able to get a reduction with the assessor.
3. Be prepared. First and best way to be prepared is pay for an appraisal. Or get comparables of homes similar in size, style, amenities, age, location. Homes that have sold in the last year and are close to yours (in your sub or a similar sub close to your) are best. Bring the appraiser or bring a Realtor. Having an expert helps. Even listings that are below your homes SEV and how long on the market helps. The more ammunition you have the better off you will be.
4. Go to the review. Don't assume that the board will accept your purchase price as your properties value. Have your information and if you have have copies for each board member it would be good. Be polite, be nice. At this time of year the board and the assessors offices are under a tremendous workload and higher stress levels. They are ordinary citizens, trying to do their job. Being rude, or confrontational will not help win your case.
5. The decision of the board of review will be mailed to you by June 1.
Russ Ravary is a licensed real estate agent in the State of Michigan and a Realtor.
Photos, Comp and Listing Information Courtesy of Realcomp II Ltd, Properties shown have been listed and sold by various MLS member REALTOR® agents.
I do not guarantee or warrantee any of the above information. Please feel free to verify any of the facts. I recommend to always have a home inspection, always consult an attorney about contracts, Purchase agreements and any legal questions. Also consult a CPA or accountant about tax consequence regarding a Michigan home sale, or Michigan foreclosure.