Has there been a property tax adjustment in Detroit

[Roadmaster49]

I was checking on some homes for sale in B-E but the last time I checked, for most, property tax was like $7000 on a $15,000 home. That was late 2008. Has the property tax valuations been lowered to reflect more realistic market values or are they still unbelievably high?

I can afford a couple of homes full cash but what's the point if my taxes are $7000 and I could not escrow due to no mortgage.

Plus I noticed right off the bat that there are a LOT less homes offered for sale on the B-E Association website. Improvement? Sounds like some people have purchased homes in the past 2 years.

[lincoln8740]

I was checking on some homes for sale in B-E but the last time I checked, for most, property tax was like $7000 on a $15,000 home. That was late 2008. Has the property tax valuations been lowered to reflect more realistic market values or are they still unbelievably high?

I can afford a couple of homes full cash but what's the point if my taxes are $7000 and I could not escrow due to no mortgage.

Plus I noticed right off the bat that there are a LOT less homes offered for sale on the B-E Association website. Improvement? Sounds like some people have purchased homes in the past 2 years.

The assessors office is either bat shit crazy or they are inflating assessed value on purpose to stop people from dumping their properties. As an example, I have a building in the beautiful cass corridor [[midtown for the hipster doofus crowd) that is assessed at 600k but on the open market it can only be sold for 200k. Thank god for prop A/the hendley[[sp) amendment because I would be taxed out of business

[gdogslim]

This is the problem with real estate in the city and the state. Tax rates and reality are at two different levels.
They base tax rates on older properties over taxed in the first place instead of taxing properties on the sale value. That is why there should be a law that tax rates should be based on sale values, NOT on a ten year old house or whatever that sold twenty years ago. This is the big tax scam in Michigan. IN ESSENCE THE SALE PRICE SHOULD BE THE TAX BASIS.
THIS IS THE PROBLEM!

[sumas]

Taxes are a huge issue in this city. Mine are $4700. A super nice house down the street from me is selling/going for under $10,000. Something wrong with this picture.

[reddog289]

I guess I grew up when I bought my house.Seeing what I have seen in the 4 years I have owned my house, I know that taxes go up down and wherever the assesor thinks they should be at. Seeing the house 4 doors down from me sell for $19 grand when I owe $129,000 makes me sick.I couldn't deal with paying $4700 in taxes here in Wayne let alone in Detroit.

[DetroitPlanner]

Proposal A locks your taxes at a certain rate. Increases have been at the rate of inflation for the last few years [[basically stagnant). Since I bougt my house there have been major hikes for the School Bond Millage, trash pick-up, and the zoo. Some were added due to votes, others were hoisted upon property owners.

The problem with foreclosures is that they are not considered comparables when setting a homes value. In Detroit [[heck you can expand this to Michigan) the majority of the sales have been forecloseures.Therefore while you know your house is not worth what it once was, you have no idea what its actual selling value woould be. In a good market it should go more than foreclosures, but when 30 pecent of your neighbors houses are selling on the foreclosure market it makes it tough to determine.

[Roadmaster49]

Hhmmm, so about the same picture. I would not even mind paying a higher tax rate then the sale price but nothing over $2000. I used to live in Des Moines, Iowa in a $100,000 house and my tax rate was $2600 annually which is high. I live in a modest home now in a small town - $700 annually.

I can't afford a Prop A frozen tax bill that's higher then $2500 probably, long term. Doesn't make sense. Look, if you have a foreclosed house generating no tax income [[or abandoned homes) then why not lower the property taxes to encourage re-entry to the city. Cut taxes way down, people occupy the homes, tax "income" for the city goes up.

Thanks all-

[mwilbert]

People bring this up all the time, but the method of assessment in Detroit is set by the state,and is not under the control of the city. They are supposed to assess your property based upon the market value the previous year [[the SEV) but the rate of increase in the taxable value is capped so if values are rising quickly the taxable value should lag. The value is not "locked" for any meaning of the term "locked" with which I am familiar, but if there is little inflation, the taxable value doesn't move up much either--if the SEV drops a lot then it can drag the taxable value down with it.

I don't think there is any problem with using market value as opposed to last sale value for assessment, as long as the market value calculation is done honestly. Not including bank sales as comparables, which as DetroitPlanner says has been the common practice, may be OK when foreclosures are unusual events, but seems to me to be clearly wrong when they are most of the market.

However, this is a short-term problem, because the foreclosures will abate and the prices in the regular market are adjusting, and there will be more accurate comparables available. Of course, the city will be insolvent and the tax rate will still be discouragingly high, but you can't have everything.

[Swimmaven]

Well, you could float a proposition 13 [[California's prop 13). Property is taxed at 1% of it's value at the time the sale. How many signature's would it take to get it on the next ballot?

It's insane to be taxed 50% of the value of your home.

[Roadmaster49]

Yes, I think $7000 taxes on a now $15,000 home are too much. 1% ? Sounds fair. As I restore or fix the home, raise my taxes based on value.

[Novine]

"It's insane to be taxed 50% of the value of your home."

Why? The percentage means nothing. It's the tax rate that determines how much you pay.

[lincoln8740]

[quote=mwilbert;208081]People bring this up all the time, but the method of assessment in Detroit is set by the state,and is not under the control of the city. quote]

The city does the assessing though, not the state via the local assessor's office. Sure there may be a "method" that is endorsed by the state but there are so many "local" factors that the assessors can pretty much do what they want. As I stated in my post above, my propertie's assessment tripled in three years. I don't give a shit because I am locked in under prop A, but the assessment could be a serious detriment if I wanted to sell it.

[mwilbert]

The city does the assessing though, not the state via the local assessor's office. Sure there may be a "method" that is endorsed by the state but there are so many "local" factors that the assessors can pretty much do what they want. As I stated in my post above, my propertie's assessment tripled in three years. I don't give a shit because I am locked in under prop A, but the assessment could be a serious detriment if I wanted to sell it.

Of course this is true, and that is why I said "as long as the market value calculation is done honestly". Of course the city should make the best assessment that it can, and if it doesn't do that it is misbehaving. However, if there are good comparables, you can appeal and the appeal is not controlled by the city. But if the good comps are excluded as a matter of policy, then that isn't going to work, which is why I think under current circumstances that policy is incorrect.

The other thing, which I am sure you are well aware of, is that commercial and multi-family properties are assessed completely differently from single-family homes and comparables carry much less weight because they can look at the income stream and value it as an investment. I assume anything allegedly worth $600,000 in the Cass Corridor area is in that category.

[Novine]

"As I stated in my post above, my propertie's assessment tripled in three years. I don't give a shit because I am locked in under prop A, but the assessment could be a serious detriment if I wanted to sell it."

This matters why? You're looking to sell low?

[lincoln8740]

"As I stated in my post above, my propertie's assessment tripled in three years. I don't give a shit because I am locked in under prop A, but the assessment could be a serious detriment if I wanted to sell it."

This matters why? You're looking to sell low?

No--- when a prospective buyer looks at a Property they will look to see how much the taxes will be AFTER the sale. If the assessment is completely out of whack with reality [[as in my situation) the taxes will skyrocket when they are uncapped after the sale no matter what the purchase price is. So a prospective buyer knows that either they will pay a lot more money in taxes than I am currently paying or they will have to appeal the taxes which will be an additional cost

[lincoln8740]

The other thing, which I am sure you are well aware of, is that commercial and multi-family properties are assessed completely differently from single-family homes and comparables carry much less weight because they can look at the income stream and value it as an investment. I assume anything allegedly worth $600,000 in the Cass Corridor area is in that category.

I share in the old school thinking that the assessment should be based solely on the land and the actual building and not the revenue activity that occurs inside the structure. I know city assessors have tried to change that line of thinking but it still holds some water at the State Tax Commission

[mwilbert]

I share in the old school thinking that the assessment should be based solely on the land and the actual building and not the revenue activity that occurs inside the structure.

If by "revenue activity" you mean the revenue of the businesses in a building, I probably agree with you as long as the revenue is at arm's length from the owner of the structure. But that leaves the question of how to value the land and building.

It seems to me that rental income is a pretty important factor, and it is certainly used in commercial property assessment around the country. On the other hand, you can't really just use comparables because it is so hard to get good ones for commercial property. If the comps exist, of course they should be used.

[lincoln8740]

If by "revenue activity" you mean the revenue of the businesses in a building, I probably agree with you as long as the revenue is at arm's length from the owner of the structure. But that leaves the question of how to value the land and building.

It seems to me that rental income is a pretty important factor, and it is certainly used in commercial property assessment around the country. On the other hand, you can't really just use comparables because it is so hard to get good ones for commercial property. If the comps exist, of course they should be used.

I know this is becoming a thread for two people but as far as the whole "arms length" thing goes---let's say you appeal the taxes when your apartment building is virtually empty and you lock in your taxes at that point--how could the city uncap it? If I go from 10 percent occupancy to a 100 percent wouldn't I still be locked in at the 10 percent revenue value?

[detroitcorky]

Maybe the state can recognize the real values more rapidly. mwilbert is right on. Detroit only gets to distribute the value that is determined by the State of Michigan

[mwilbert]

If I go from 10 percent occupancy to a 100 percent wouldn't I still be locked in at the 10 percent revenue value?

Excellent point. This is mitigated to some extent by the fact current income shouldn't the only factor considered in the valuation process, but it is certainly a problem.