Be ready for your property taxes

It’s that time of year for you to be ready for your Property taxes.

You should receive, from your local assessor, a notice of assessment change sometime later this month (February) or the 1st week of March. Here are a couple of examples:

· Lodi and Pittsfield Townships will mail out their 2009 assessment notices during the last week of February.
· The City of Ann Arbor will mail out their 2009 assessment notices during the 1st week of March.

The notices of assessment will give you the proposed 2009 State Equalized Value (SEV) and Taxable Value (TV). Your property taxes are based on TV, while the SEV is “supposed” to give you an idea of the market value of your property. We all know that the market value of our property has declined in the past year, so you should look for your SEV to decline this year. Each municipality may have a different rate of SEV decline for last year.

Your TV this year could change for 3-reasons:

1. The rate of inflation (Consumer Price Index, or C.P.I.) was 4.4% for 2009 for everywhere in Michigan – meaning that your TV may rise by 4.4% this year (Gasp!);
2. Any improvements that you made to your property in 2008 – meaning that if you improved your property last year, you should expect that your taxable value would go up by the amount of your improvement;
3. If you bought your home in 2008, your TV would un-cap and go to the same level as the SEV.

In your notice of assessment will be the schedule for the Board of Review (BOR) for your municipality. For example, in Lodi Township (where I live), the BOR is scheduled for 9am-3pm on Monday, March 9, and from 3-9pm on Tuesday, March 10. Your municipality will have a similar schedule. Typically, your appointment time with the BOR will be ten minutes. During that time, you will have an opportunity to present your case for the BOR to change (lower) your SEV or TV, or both.

There is one and only one question that typically matters with the BOR - does the SEV or TV exceed 50% of the market value of the property?

Things that are irrelevant to the BOR include:
· Your property taxes are going up while values are dropping;
· Your property taxes are higher than those of your neighbors;
· Your “feeling” that your property taxes are excessive.

Even if you are right on each of these three items, it doesn’t matter. What does matter to the BOR is that you show that your new TV is greater than 50% of the market value of your home as of December 31, 2008.

The window of time between receiving your 2009 notice of assessment and making an appointment to appeal with the BOR is narrow. You need to be ready for the notice, and call quickly to schedule an appointment of protest with your BOR. If you miss the BOR schedule, once the BOR adjourns, then your SEV & TV are set for the year.

In short, be ready for your Property taxes!

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Property Tax Board of Review

For the past two days, I’ve been serving as a member of the Board of Review (BOR) for Lodi Township. For each of the past ten years, I’ve served the Township on the BOR on the second Monday and Tuesday of March.

The Lodi BOR consists of three members – all residents of Lodi township - myself, and two others. Until this year, one of our Board members was a long-time farmer in the township. Sadly, he passed away last year, and we missed him greatly at the BOR meetings this year. He was replaced this year by a real estate appraiser who lives in the township. Our third member is an attorney who specializes in commercial real estate. I bring “market knowledge” to the BOR. Working with these other BOR members has been a pleasure.

The function of the BOR is to hear resident’s appeals of the assessed and taxable value of their real property. Most of those who appeal are not “experts” in property value, nor are they expected to be. Many of them bring a passionate voice to their appeal. What we look for is evidence which supports the value that they place on their property. Sadly, most bring no supporting evidence, so they are less than successful in their appeal.

So, what would I like to see as a BOR member?

Ideally, I would like to see a fee-paid appraisal of the resident’s property, which supports their claim of value (presumably MUCH lower than the assessor’s claim of value). The cost of having an appraisal of your property begins at $350 and goes up from there, so most residents don’t go that far with their appeal.

Short of a fee-paid appraisal, I’d like to see a presentation of comparable properties to the resident’s own property. These comparables can come from a Realtor®, or from the resident’s own research – either on the internet, or directly at the Township offices. I know, I know, it’s very surprising to think that you could do research at the Township (or City) offices. The assessor WON’T bite your head off! Really! Most assessors enjoy discussing their work with residents.

So what kind of data should you get? By definition, a “comparable” property to yours would be a home of similar size, style, age, and location. Ideally, other homes like yours in the same subdivision will support your argument the best. If you have a 2-story home, and you bring only ranch homes as comparables, you have little chance of success. If you have a ranch, and you bring 3, 4, or 5 other similar ranch homes like yours, you have an excellent chance of successful appeal.

What if there are no recent sales of comparable properties? This is becoming a more frequent occurrence, as the number of home sales declines in our region. In this case, look for comparable properties which are currently offered for sale. If the asking price of the homes for sale is less than your taxable value, you have a strong argument in your favor.

I’d be happy to help you with your determination of value for your home in preparation for your Board or Review. I’m not a licensed appraiser, so I cannot offer you a “fee-paid” appraisal. What I can offer is an experienced opinion on your likelihood of success in your appeal. Call or write me.

Why Are My Property Taxes So High?

The taxes on your “real” property (what the Assessors call your home) are based on the taxable value of your home and the millage rate for your area.

I’ve written previously about the taxable value of your home.

If you are interested in local millage rates, here is the definitive source for 2006. As soon as the 2007 publication becomes available, I will publish it here. Washtenaw County property tax rates begin on page 146.

The millage rate on which your taxes are based is made up of a composite of the amounts charged by the state, county, township, intermediate school and school district. Any requests for millage increases are voted on by us, the voters.

So what will happen to property taxes in 2008?

Could there be a silver lining to the increasing number of foreclosures in Michigan? Maybe. Maybe not.

Last year, The State of Michigan changed the laws allowing foreclosures to be taken into consideration in property tax assessments. Previously the depressed sales were disallowed as aberrations.

The State Tax Commission also changed rules allowing sales studies to be based on one year of sales instead of two. The two year ruling had helped to keep assessments low during periods of rapidly increasing sales prices, but it also kept assessments high during periods of rapidly falling prices.

For more information read the article from the Detroit Free Press.

Combined, these two changes could have a significant impact on assessments, but most home owners who have been in their homes for more than a few years will not see any difference in their taxes because of the current cap on property tax increases.

The State of Michigan also provides a website where you can get an estimate of your property taxes. I haven’t tried this website, so I can’t attest to the accuracy of their estimate.

Finally, here’s a different way of looking at the value of your home.

Property Taxes

Property Taxes

I am often asked about the property taxes on a piece of real estate – it could be a home, or a condo, or a building site for future use.

Given the state of our market (which I’ve written about previously), there are likely to be a lot more questions about property taxes in the coming year. More specifically, since the overall value of most properties In the Ann Arbor area has gone down by 15% since our market peak in 2004, most of us will expect that our property taxes will go down by the same amount.

Au contraire! (pardon my French, there).

If you bought your home since 2004, then it’s likely that your property taxes will go down in 2008. However, if you’ve owned your home for a while, and have seen its value increase until 2004, then it’s possible that your property taxes will actually go up next year. How can this be?
In seeking an answer for this question, I found a helpful post by the City of Saline, which I’ve excerpted below.


What is the difference between the Assessed Value and the Taxable Value?

Each year the Assessing Office must calculate the SEV (Assessed Value) and Taxable Value of each property. In determining the SEV, the assessor identifies area neighborhoods and uses a 2 year sales study to analyze market values within each neighborhood, comparing the sale price of a property to its assessed value. The sales study period for the 2007 assessments was 04/01/04 to 03/31/06. A review of all arms length sales within each neighborhood for the required study period is used to determine individual Assessed Values.
The Taxable Value is the value to which the millage rate is applied, thereby determining your taxes. The Taxable Value on the property is said to be: “Capped” if the property owner has not had any additions or losses on the property or did not purchase it in the preceding year. The Taxable Value is calculated by adding the CPI or 5% (whichever is less) to the prior years Taxable Value. Proposal A intended to put a cap on the Taxable Value of property so that taxpayers wouldn’t be as affected by a strong economy and significant increases in valuation, the intention was to make changes to the Taxable Valuation more gradual by tying it to the rate of inflation.

Sales prices in my neighborhood have been decreasing. Will my property valuation decrease as well?

If you’ve owned your property for a significant amount of time, it is likely that your SEV exceeds your Taxable Value. If this is the case, a decrease in market value as determined by city sales studies, would result in a decreased assessed valuation and SEV. The Taxable Value however, is required by the Michigan Constitution to increase each year by the rate of inflation or 5%, whichever is lower. In the case of a long time property owner, the SEV could decrease, while the Taxable Value would increase. The Taxable Value cannot be higher than the SEV.

How does that impact my tax bill?

Because the taxes are based on the Taxable Value rather than the SEV, even with a decrease in the SEV, the taxes could still go up.

I just bought my house. Will the assessed value automatically be half of what I paid?

By state law, a home’s Assessed Value is not half its purchase price, but half of its market value. The study period and process identified in paragraph 1 is used to determine market values. The Assessor and the Board of Review must follow the same procedures for determining the Assessed Value (SEV) of properties that have experienced a “transfer of ownership” as are used for properties that have not experienced a “transfer of ownership”.


The “Bottom Line”?


If you’re wondering about your specific property tax situation, feel free to give me a call. I’d be happy to help explain your options and advise you how best to move forward.