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Answering all those burning questions you didn’t know you had about home ownership.

Property Tax Assessment: Should You Appeal?

Picture of Jessica Dabkowski

Jessica Dabkowski

Helping you with all things homeownership!

We all like to see our home jump in value. It means we made a good decision to purchase said property, and we all like a little reassurance that we made a smart decision.

Smart decision aside, higher home values can translate to higher property taxes. So today, we’re going to talk about tax assessments and why you should take a closer look at your annual tax assessment.

The Tax Assessment could be voted “Most Likely to End Up in the Junk Drawer.” Why should you care? The higher your assessed value, the higher your tax bill.

Properties are assessed for value as of December 31 for the following year’s tax bills. Most localities send out their assessment notices in February. BOLO (be on the lookout) for your statement. (Sorry, couldn’t resist. I’ve been reading a lot of crime novels lately.)

What Is a Property Assessment?

A property assessment is the state’s determination of the value of your home as it relates to applying the formula for property taxes. In Michigan, your assessment will display both the State Equalized Value (SEV) and the Taxable Value.

The SEV is equal to half of the market value. Your local assessor determines this “market value.” When you purchase a new home, the SEV will often be half of your purchase price or just under.

The Taxable Value is the value on which your property taxes are based. In Michigan, your taxable value cannot increase more than either 5% or the level of inflation, whichever is lower. If you add something major to your home, like a swimming pool, the cap does not apply.

In the year following the purchase of your home, the SEV and Taxable Value will be the same. After the purchase, the amounts may diverge because of the cap on Taxable Value.

Okay, with all that crazy vocab being thrown around, let us walk down Example Lane together. If your home’s value increased by 8% last year based on the real estate market in your neighborhood, your SEV may go up 8%. The increase to your Taxable Value, however, will be capped at 5% or the value of inflation.

The assessor’s office applies the millage rate tax formula to your Taxable Value, which equals the property taxes you will owe for the year.

If you’ve been in your home for a number of years, it is likely your Taxable Value is less than your SEV. The cap on Taxable Value is intended to keep people’s property taxes under control so they are not forced out by rapidly increasing property values. (*COUGH* City of Plymouth *COUGH*).

Review Your Assessment Carefully

Once you receive your assessment, take the time to carefully review the document to look for mistakes.

If your mortgage company pays your taxes from your escrow fund, you will still receive a copy of your assessment. As the homeowner, you are responsible for ensuring the statement is accurate and the taxes are ultimately paid.

Depending on home values in your area, it could be an accurate reflection of your current home’s value. Or, maybe not. It’s up to you to find out since most local governments are not in any hurry to reduce tax revenue on their own.

A word of caution for you. In a hot market with amped up increases in value, you may not have a case for a reduction in value. In a down market, a reduction in value may be warranted. For example, in the years following the housing crash in 2008, many owners lobbied for a reduced SEV based on the depressed sales in their neighborhood.

The Appeals Process

Many times you have a limited time to appeal, so know the deadline and the process in your locality! Deadlines are stricter than a nun in math class. You are unlikely to get any sympathy from your neighborhood Assessor if you miss the deadline.

1. Do Your Homework

Records are kept at your tax assessor’s office and can be reviewed at any time to find out what your assessment value is for your property. Luckily, this is 21st century and many of the records are accessible online.

For Plymouth, Canton, Livonia and the surrounding areas, many municipalities use an online site called BS&A to hold property records. This site is a treasure trove of information, people!

Assessors use replacement value, comparable sales prices or a combination to determine a home’s fair market value, which is considered the estimated price a home would fetch on the open market.

Depending on the locality, the assessed value can be the full market value or a percentage of the market value (an assessment ratio).

Homes are not usually individually appraised every year but the assessor may apply an average price increase formula using recent sales data to adjust values for an entire area until the next full re-evaluation, which could be every 3, 7, 10 years or only when the property changes hands.

Find out when the last full appraisal was in your area and how the value has been calculated since then. The longer the time has been since the last full appraisal, the more likely you will have an argument that the property tax assessment is incorrect.

2. Correct Errors

Review your property records, whether online or at your local assessor’s office. Make sure the description of your home is accurate. Verify the lot size, the number and type of rooms, and the square footage. This is very important, so look closely at your property tax assessment.

Look for mistakes. A half-bath recorded as full bath or a screened-porch included in your year-round living space impact the SEV. It happens more than you think, so double check!

Make sure your home is showing as Homeowner’s Principal Residence. This status is also often referred to as “Homestead”. In Michigan, “Homestead” is a category you claim for your primary residence, which flags you for the lower property tax rate. If your assessment is showing as “Non-Homestead” for your primary residence, you want to correct this issue immediately. If you recently purchased your home and forgot to file your Transfer Affidavit, I’m talking to you!!

3. Compare to Other Homes

Look at public records at the assessor’s office to see how your home stacks up to comparable homes in the neighborhood. “Comparable” means homes of the same size, age, and general location. For example, homes near a busy road are valued less than those next to a quiet park or wooded area. If you live in a ranch-style home, you want to look at other ranches, etc.

If you don’t have the time or don’t want to mess with it, your can hire a realtor or an appraiser. This is an option, but with the data available to you on the internet you can definitely do the research yourself.

Determine if your potential tax savings warrants a challenge … will the payoff be worth the effort?

4. Seek the Appeal

Finally, if you think you have a case, seek the appeal and challenge your property tax assessment. You can find appeal information on your locality’s website or on the Assessment Notice itself.

Make sure you have documentation to back up your argument. You will need to demonstrate why your home has been overvalued.

The appeals procedure will vary by locality and it is critical to understand the system — deadlines vary. You may want to seek the assistance of a tax professional, appraiser, attorney, or real estate agent to help you out.

Visit these websites for detailed information:

Don’t feel like you have to do this on your own, please reach out to me if you have questions! As always, I’m here to help with all your homeownership goals, questions and dreams.

Photo by Nataliya Vaitkevich from Pexels

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