Michigan Supreme Court Decision HUGE Implications for Detroit.

LANSING — "In an opinion with significant ramifications for Wayne County and all of Michigan, the Michigan Supreme Court ruled Friday that local governments can’t keep the profits from property sales resulting from tax foreclosures, but must return the excess proceeds to the former owners."

https://www.freep.com/story/news/loc...it/5459650002/


While on the surface this may sound like a good thing for struggling homeowners, it's likely to have enormous consequences for the Michigan in the future. For investors it eliminates most of the negative consequences of not keeping current on property taxes, and is likely to lead to a massive spike in tax foreclosures and a big loss of revenue for the counties.

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Originally Posted by Johnnny5

For investors it eliminates most of the negative consequences of not keeping current on property taxes

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Which is usually handled with a tax lien. Investors need credit, tax liens negatively effect credit, along with balance sheets used to accumulate credit, and the possibility of selling or renting property, etc...

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and is likely to lead to a massive spike in tax foreclosures and a big loss of revenue for the counties.

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Why would that happen?

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Originally Posted by JBMcB

Which is usually handled with a tax lien. Investors need credit, tax liens negatively effect credit, along with balance sheets used to accumulate credit, and the possibility of selling or renting property, etc...



Why would that happen?

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How could it not? The counties are going to take the financial hit because as it stands now all of the funds from a foreclosed property sale go to the county. So if unpaid taxes on a property are 10k and the property sells for 50k at auction under the old rules the county ends up with 40k more than it would if this decision stands.

Not only that, but the incentive to pay property taxes and avoid foreclosure is greatly reduced because the delinquent former owner won't automatically lose all equity from the sale. The county will in a round about way just be selling the property for them! That's why more property owners will be less likely to take steps to avoid foreclosure, and there's no way that less than moral investors/speculators are not going to take advantage of this.

You people do realize that the counties make a big amount of interest on properties once it goes into foreclosure status [[for a year before actual sheriff sale). They charge 18% interest [[1.5% per month). So they get a nice return on property tax interest... even if they have to pay excess sheriff sale profits back to the previous owners.

This also includes properties that go into foreclosure, but the taxes get paid off by the owners to get it out of foreclosure before the sheriff sale... 18% interest.

Yes, there are interest charges, but it's only on the past due taxes not the value of the property. I've bid on a few foreclosures in Southeast Michigan [[Not in Wayne County) and the sale prices for most habitable dwellings were typically many times that of the back taxes, interest and other associated fees. The sale of these properties helps make up for the loss of tax receipts that the counties incur on the properties that don't sell, or don't sell for enough to cover the back taxes. That includes those that have little value as is and require demolition or environmental remediation [[Which many of them do).

Yes, this will be a big revenue loss for counties. So instead of auctions, they have foreclosure sales. Here is the price [[back tax, penalties and interest). The first to enter into a sales agreement gets the property, and the previous owner sees no return on investment or equity.

I don't believe either should happen. Back taxes on single family residential properties should never be grounds for such actions. Put a lien on the property and collect if it's ever sold. Prohibit transfer of title to relatives if the owner dies. Garnish wages or a small portion of any government benefit checks.

NO ONE should ever be forced out of their primary home for taxes.

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NO ONE should ever be forced out of their primary home for taxes.

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I agree, my brother like thousands of others lost his home in 09 during the recession to taxes, and nobody was willing to work with him to keep his house. At the time, he couldn't come up with the money to save it, after being there 16 years.

I know a few folks that would jump at the chance to use an investment vehicle that would provide 18% return. They would buy it.

Here's a good 10-minute overview of the case by Steve Lehto, a Southfield-based consumer law attorney.
https://www.youtube.com/watch?v=0FhQCtouEh0

tl;dr version - The supreme court found that, if you owe a debt to a government entity due to back taxes, the government cannot seize more than the value of the taxes owed under 4th amendment protections. IE, if you owe the government $100, they can't take something worth $10,000 from you, without refunding the other $9,900.

^^ Yeah, yeah, we got that part. What I haven't seen is if the offending entities in these cases have to refund what they stole that led to these cases being filed.

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Originally Posted by Meddle

I don't believe either should happen. Back taxes on single family residential properties should never be grounds for such actions. Put a lien on the property and collect if it's ever sold. Prohibit transfer of title to relatives if the owner dies. Garnish wages or a small portion of any government benefit checks.

NO ONE should ever be forced out of their primary home for taxes.

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Many [[Maybe even most) homeowners in Detroit would simply NEVER pay property taxes. And why would they? Under this idea a young person could buy an inexpensive home for cash, live in it until they're 80 and never pay their share for city services, schools, anything. The sale of the house when they pass isn't likely to add up to anywhere near the loss in taxes.

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Originally Posted by Johnnny5

Many [[Maybe even most) homeowners in Detroit would simply NEVER pay property taxes. And why would they? Under this idea a young person could buy an inexpensive home for cash, live in it until they're 80 and never pay their share for city services, schools, anything. The sale of the house when they pass isn't likely makeup anywhere near the loss in taxes.

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Um.... I think your missing the most important point... the house would go into foreclosure status... and the only difference now is that whatever the house sold for at a tax auction... the person who lost the house would be reimbursed the difference of the tax owed, and whatever the house sold for. In many instances homes can sell at a tax foreclosure auction for only a fraction of what they are really worth. So in the future the minimum auction amount would be what is owed in taxes.

In a bank foreclosure auction... the minimum bid would likely be what is outstanding on the mortgage.

State and Federal Tax Refunds can be seized. Wages and bank accounts can be garnished. Water could potentially be turned off. Driver's licenses and/or plates suspended.

The saying 'we have ways ... ' applies here.

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Originally Posted by Gistok

Um.... I think your missing the most important point... the house would go into foreclosure status... and the only difference now is that whatever the house sold for at a tax auction... the person who lost the house would be reimbursed the difference of the tax owed, and whatever the house sold for. In many instances homes can sell at a tax foreclosure auction for only a fraction of what they are really worth. So in the future the minimum auction amount would be what is owed in taxes.

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I'm saying a person could NOT lose their primary residence for back taxes.

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Originally Posted by Gistok

Um.... I think your missing the most important point... the house would go into foreclosure status... and the only difference now is that whatever the house sold for at a tax auction... the person who lost the house would be reimbursed the difference of the tax owed, and whatever the house sold for. In many instances homes can sell at a tax foreclosure auction for only a fraction of what they are really worth. So in the future the minimum auction amount would be what is owed in taxes.

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I was directly replying to Meddle's hypothetical idea about ending foreclosures and evictions while the property owner was still living.



I understand the actual change in the law, it was the reason I started the thread.

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Originally Posted by Meddle

^^ Yeah, yeah, we got that part. What I haven't seen is if the offending entities in these cases have to refund what they stole that led to these cases being filed.

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As Lehto says at the end of his commentary, it's a distinct possibility. If it's wrong to do so going forward, it was wrong to do so before the decision, as well. We won't know for sure until someone files suit to get their money back. They would probably have a strong case, as there isn't a solid legal basis for the government to confiscate more money than is owed to them, at least as far as taxes is concerned.

Look for tax increase proposals in the form of sales, income and business taxes soon. These counties and cities aren't going to just say okay it's time to reduce our spending. They need an agenda to run their careers on, and those agendas typically cost money. For all of you that have paid your taxes over the years, well you will be the ones paying for the newly created budget gap. Regardless, I think this was the right call by the courts

It looks like the Oakland County commissioners are worried about the prospect of people clawing the value of their foreclosed properties back. They sent a letter to the treasury wanting details about their tax foreclosure procedures. The key quote is "It appears your actions as Treasurer to foreclose on an Oakland County retiree’s property for $8.41 has exposed the county to serious risk." I would say so.

https://www.detroitnews.com/story/news/local/oakland-county/2020/07/22/oakland-county-board-tax-foreclosure-eight-dollars-court-ruling/5489758002/

I'm not sure why anybody would think this means more foreclosures, if anything it means less.

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Originally Posted by Satiricalivory

I'm not sure why anybody would think this means more foreclosures, if anything it means less.

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It has little to do with actual foreclosures,as post #19 points out,it is a way to make money in real estate with massive room for scrupulous behavior.

They can find another way.

It will reduce foreclosures against those who owe more taxes then the value of the house,but it also gives incentive to foreclose on profitable houses faster,which increases the rate.

It does not address the core issues that are leading up to the delinquency to begin with.

You can bet no house will be resold at FMV,it’s the state getting into the flipping business for the select few.

If you want to walk away,just walk away and let the state play the realtor and send you a check in the mail,one would think the goal is to keep people in their homes and keep established communities intact.