NEZ Tax Abatement Questions

**stinkytofu** · March-02-16, 11:13 AM

All:

I'm considering a few different condos in the city, but am struggling to get some questions answered.

The properties all have a NEZ tax abatement in place, but I can't find documentation about when the abatement expires. Does anyone know where I can locate that information? Additionally, trying to figure out current tax on property with abatement [[not sure how much I trust things like MoveInMichigan), what tax is when abatement expires, and how hard it is to renew abatement. My realtor basically just forwarded me a link to read about the abatement, but no concrete info about specific properties.

I have read quite a bit about how property values go down when an abatement expires as higher taxes obviously makes the property less valuable.

Problem is I'm a rookie home buyer who has no idea what he's doing.

**ndavies** · March-02-16, 11:30 AM

The NEZ abatement last 15 years from the date it was issued. That date will vary according to when the property was originally occupied. The NEZs value depends on the property type and whether it was new build or rehab. Your realtor will have to ask the current owner when the NEZ expires and what the NEZ taxes are. Tell them you want it in writing. That way you can sue them if they fudge the numbers. The NEZ is not renewable. It's a one time shot.

Future non-NEZ annual property taxes will basically be [[selling price/2000) * Millage rate. The Current millage rate will be 63 if homesteaded, 85 if non homestead. A 300,000 condo will cost you $9450 in property taxes each year if homesteaded.

**stinkytofu** · March-02-16, 11:44 AM

Originally Posted by ndavies

The NEZ abatement last 15 years from the date it was issued. That date will vary according to when the property was originally occupied. The NEZs value depends on the property type and whether it was new build or rehab. Your realtor will have to ask the current owner when the NEZ expires and what the NEZ taxes are. Tell them you want it in writing. That way you can sue them if they fudge the numbers. The NEZ is not renewable. It's a one time shot.

Future non-NEZ annual property taxes will basically be [[selling price/2000) * Millage rate. The Current millage rate will be 63 if homesteaded, 85 if non homestead. A 300,000 condo will cost you $9450 in property taxes each year if homesteaded.

Wow - great insight, thanks. It appears that the taxes currently on the properties are about $1,000 with abatement and the asking prices are around $130,000. It would be my primary residence so homesteaded. My math shows property taxes will jump up to about $4,000. Yikes.

**3WC** · March-02-16, 11:59 AM

$9,450 in taxes for a $300,000 property is atrocious. Does anyone even fantasize about a Detroit rebirth with such high taxes?

A $300,000 property in Bloomfield Hills/Bloomfield Twp. would be taxed at about $3500, and the services and schools are 100 times better than Detroit.

Detroit taxes evidence the high price of corruption and incompetence of its leaders, which didn't cease just because Kwame went to jail, and 50 years of Democratic control.

If it weren't for Dan Gilbert this place would be dead. Zombie dead. Walking dead. Period.

**Kevgoblue** · March-02-16, 12:14 PM

Originally Posted by 3WC

$9,450 in taxes for a $300,000 property is atrocious. Does anyone even fantasize about a Detroit rebirth with such high taxes?

A $300,000 property in Bloomfield Hills/Bloomfield Twp. would be taxed at about $3500, and the services and schools are 100 times better than Detroit.

Detroit taxes evidence the high price of corruption and incompetence of its leaders, which didn't cease just because Kwame went to jail, and 50 years of Democratic control.

If it weren't for Dan Gilbert this place would be dead. Zombie dead. Walking dead. Period.

The tax rate for Bloomfield Hills is 36.74 mils. So for a property worth $300K the taxes would be just north of $5,500.

**stinkytofu** · March-02-16, 12:21 PM

Originally Posted by 3WC

$9,450 in taxes for a $300,000 property is atrocious. Does anyone even fantasize about a Detroit rebirth with such high taxes?

A $300,000 property in Bloomfield Hills/Bloomfield Twp. would be taxed at about $3500, and the services and schools are 100 times better than Detroit.

Detroit taxes evidence the high price of corruption and incompetence of its leaders, which didn't cease just because Kwame went to jail, and 50 years of Democratic control.

If it weren't for Dan Gilbert this place would be dead. Zombie dead. Walking dead. Period.

Yes - very concerning.

I'm a current renter in the city and considering buying. Younger non-profit employee with a modest salary.

Dropping $4,000 in property taxes on a tiny condo - with a high HOA - it's troubling. Plus higher car insurance. Pushes the brain towards suburbs...

**stinkytofu** · March-02-16, 12:39 PM

Seems like a pretty bad idea to buy a property with just a year or two left on abatement unless you factor in the higher taxes and how the higher taxes impact property value going forward in your initial offer. The condos I'm looking at are quickly escalating in price, but the abatements are expiring soon. What will someone offer five years down the road when the prop taxes are $4,000 compared to $1,000 like now? Guessing it may not end well.

**ndavies** · March-02-16, 12:51 PM

The NEZs and Duggans home incentive plans all mess with the appraised value of the homes to bring down taxes. These approaches are just Band-Aids. This doesn't fix the core issue of the property tax Millage rates being too high.

**hybridy** · March-02-16, 01:21 PM

Originally Posted by 3WC

$9,450 in taxes for a $300,000 property is atrocious. Does anyone even fantasize about a Detroit rebirth with such high taxes?

A $300,000 property in Bloomfield Hills/Bloomfield Twp. would be taxed at about $3500, and the services and schools are 100 times better than Detroit.

Detroit taxes evidence the high price of corruption and incompetence of its leaders, which didn't cease just because Kwame went to jail, and 50 years of Democratic control.

If it weren't for Dan Gilbert this place would be dead. Zombie dead. Walking dead. Period.

i think ur bloomfield numbers are very low. i pay over 5k for 'assessed' value of 136k.

**ABetterDetroit** · March-02-16, 03:30 PM

Anyone considering buying a home in the State of Michigan should be using this:

https://treas-secure.state.mi.us/pte...testimator.asp

Always pull the tax records on what you are considering to making a offer on. There is no reason to take anyone's word on the expiration of NEZ. Find out for yourself.

**3WC** · March-02-16, 04:19 PM

One of my children owns a home in Bloomfield that would sell today for a little over $300,000. His taxes are slightly over $3500/year.

Obviously, taxes are based on assessed value [[not market value) and his home has appreciated since he acquired it. The tax increases have been capped by state law. If the house were to be sold today for $300,000, the assessment would be based on 50% of the true cash value [[sales price usually) and the taxes would be higher, but not close to $5,000.

Sales prices of residential [[and other) real estate in Detroit are significantly depressed because of the astronomical real estate tax rates [[and city income taxes.) When seeking a mortgage, the loan is generally underwritten based on the residence's occupancy costs [[principle, interest [on the mortgage], insurance and real estate taxes - and frequently utility costs) as a percentage of the mortgagor's income. The higher the real estate taxes, the lower the loan amount, and therefore the buyer is often priced out of the place he wants to buy.

**hybridy** · March-02-16, 04:36 PM

then im to assume this home was acquired awhile ago...as my market value is above the 300k mark

**3WC** · March-02-16, 06:20 PM

Yes. It was acquired a few years ago.

**SammyS** · March-02-16, 07:58 PM

Good discussion. I've also heard that NEZ does not totally expire but instead the abaitment progressively reduces over a period of time [[like 5 years after the full NEZ expired)

**innercitydoc** · March-02-16, 10:03 PM

Originally Posted by SammyS

Good discussion. I've also heard that NEZ does not totally expire but instead the abaitment progressively reduces over a period of time [[like 5 years after the full NEZ expired)

And I've heard that the NEZ starts phasing out gradually at 10 years and fully expires at 15. My NEZ is at 10 years this year so I guess I'll find out for certain.

**SammyS** · March-03-16, 08:19 AM

Originally Posted by innercitydoc

And I've heard that the NEZ starts phasing out gradually at 10 years and fully expires at 15. My NEZ is at 10 years this year so I guess I'll find out for certain.

No kidding. Explains why there were so many condos at Crosswinds in brush park up for sale in 2015. Phase I was completed in 2000 I believe and therefore......

**EastsideAl** · March-03-16, 01:22 PM

I'm not sure how anyone suggests we keep aging schools open and heated, or what bare bones city services we have left running across 140+ square miles, in a city built for over 1.5 million people that now has about 700,000 people. With bottomed-out housing values and abatements [[as pointed out here) on almost all new or renovated buildings. And particularly with our lovely "don't give them a dime, give them an emergency manager and fuck them if they want clean water, etc." governor and legislature in Lansing. Yes, the situation sucks, but the floor is open to some suggestions beyond yelling at long-gone Kwame, comparisons with already wealthy suburbs, and aimless whining.

**Bham1982** · March-03-16, 01:27 PM

Originally Posted by 3WC

One of my children owns a home in Bloomfield that would sell today for a little over $300,000. His taxes are slightly over $3500/year.

In Bloomfield Hills/Twp., I don't understand how a residential property would have that tax rate. Those are both relatively high tax jurisdictions and a 300k property would probably run around 8k-9k in taxes. Is there something ridiculous with the assessed value?

**ndavies** · March-03-16, 02:17 PM

Originally Posted by Bham1982

In Bloomfield Hills/Twp., I don't understand how a residential property would have that tax rate. Those are both relatively high tax jurisdictions and a 300k property would probably run around 8k-9k in taxes. Is there something ridiculous with the assessed value?

Bloomfield hill/twp tax rate isn't that high. Higher than royal oak but pretty typical for Oakland county. In Bloomfield hills, It's 40 mills for the Birmingham school district and 36.74 for the Bloomfield school District. The township is 3 mills higher. That would put a home with a taxable value of $150k [[$300K market value) at around $5000-$6000 if bought today. If they've owned the home awhile their taxable value would be clamped at the rate of inflation.

**detroitsgwenivere** · March-03-16, 05:23 PM

My family pays over $6k a year in taxes for 1500sqft bungalow in Royal Oak that is rented out.

http://www.ci.royal-oak.mi.us/depart...sing/tax-rates

**RO_Resident** · March-04-16, 02:15 PM

Originally Posted by detroitsgwenivere

My family pays over $6k a year in taxes for 1500sqft bungalow in Royal Oak that is rented out.

http://www.ci.royal-oak.mi.us/depart...sing/tax-rates

Non-homestead rates are always going to be higher. The homestead rate would be just over $4k, which isn't unreasonable for the area.

**detroitsgwenivere** · March-04-16, 11:08 PM

Originally Posted by RO_Resident

Non-homestead rates are always going to be higher. The homestead rate would be just over $4k, which isn't unreasonable for the area.

I'm not bitching necessarily. Just stating the facts.

**RO_Resident** · March-05-16, 09:16 AM

Originally Posted by detroitsgwenivere

I'm not bitching necessarily. Just stating the facts.

We rented out our first house after we purchased our second house.

Being young and naive, we didn't account for the difference in the tax rates for the original house. We didn't count on having terrible tenants, either. Sold the house in the downriver area after a year.

Back to the NEZ tax abatement--Detroit Planner looked at one of the Crosswinds townhomes. The tax abatements were already ramping down a few years ago.

**3WC** · March-05-16, 09:47 AM

One thing this thread makes clear is that's it's ridiculous that properties of equal value in the same tax district are taxed at such different rates.

Our local real estate tax scheme is as screwed up as our federal tax code and every other tax scheme [[except sales taxes) formulated by the geniuses in Washington, Lansing and our various municipalities.

**SammyS** · March-05-16, 08:11 PM

So I've been thinking about this. Suppose you purchased a $300k condo as an investment with the intention of renting it out. Interest and Principal with 20% down and at today's rates will be ~$1200/month and taxes ~$1150/month. To break even, you'll need to charge $2350/month and that doesn't include putting some aside for the income tax on the rental revenue.

That's quite a premium for living close to downtown if you ask me.

Prediction:
Either rents start shooting up or we'll have a bunch of foreclosures once the NEZ runs out.