The Proposal A Pickle: Hey, Brian Dickerson, Who Do You Mean?
Published January 27th, 2007 in Buyer Information, Finance, Metro Detroit, Real Estate Opinion, Seller Information, Taxes.
Yesterday Brian Dickerson put out a very good piece about property taxes in the Freep. Long story short, Brian is right. Proposal A needs to be shelved. The sooner the better. But I will get to my question for Brian shortly. My first order of business is to highlight the things that I think matter for homeowners in Oakland County.
Next month we are all going to receive our assessment notices. Before I get too far, let me remind everyone who bought a house in 2006 to look at that assessment closely. You might need to schedule an appointment with the March Board of Review if your new taxable value is more than double your sales price.
Even though real estate prices have fallen recently in Metro Detroit, tax bills are likely to be headed up. Great news, I know.
First, there’s the fact that the property assessments homeowners will begin receiving next month are based on home sales during a 24-month period that ended almost a year ago, on April 1, 2006.
So if property values in your neighborhood were holding their own back in 2004 — or even rising at a double-digit annual pace, as they did in some suburbs — the state equalized value (SEV) on this year’s assessment will reflect that, even if prices have plunged precipitously in recent months.
Kind of stinks, I agree. But the problem is likely to get worse before it gets better. Our local governments and schools are facing shrinking budgets in the very near future. There is no way of getting around this.
We have long said that we don’t care for Prop A. As real estate investors ourselves. we hate the fact that other investors are paying far less in property taxes than we are on equal properties. Since we are competing with them for tenants, they have an unfair advantage created by Prop A because their taxes are 50% (and more) lower than ours. Prop A should never have protected non-homesteaded property. The original intent of Prop A, as we understand it, was to protect older people so that they would not be taxed out of their homes. While those sentiments are thoughtful, we have created a regressive tax. Essentially we are taxing the young to protect the old. Doesn’t seem right to me.
Brian says,
Taxpayers might accept a change in the Proposal A formula if cities started laying off police and firefighters in droves. But powerful real estate interests would resist any change in the status quo.
I am not sure who these powerful real estate interests are. Clearly not me, one little Oakland County Realtor. My voice has gone unheard. I want Prop A revamped yesterday. It is trapping people in their houses because they can’t afford to have their taxes uncapped. It is contributing to our sluggish real estate market which already has to fight against the mighty giant named the Michigan economy. It is wreaking havoc on our schools, and that is going to get worse too.
So, Brian Dickerson, name names. It is time to take on the powerful real estate interests because we are already in a big pickle!
Kosher Baby Dill is by BunchofPants
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______________________________________________________________Written by Maureen Francis
SKBK Sotheby's International Realty, 248.430.4450
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11 Responses to “The Proposal A Pickle: Hey, Brian Dickerson, Who Do You Mean?”
- 1 Trackback on Feb 6th, 2007 at 4:51 pm
- 2 Pingback on Feb 29th, 2008 at 12:36 am
Oh yes, a painful time of year. Somehow it is a comfort to know that home values are going up; but it would be nice if someone else could pay the taxes
I had a client move to Florida, we just rented her home here. She told me today that insurance costs because of the hurricanes were up to between 4k and 7k a year. She thinks she and hubby will be renting for a while in Florida. There are lots of ways to get trapped.
If you are recommending scheduling an appointment with the March Board of Review, you need to tell people to go prepared. The mere fact that their purchase price was not two times the assessed is not enough to win a reduction. They need to take comparables to show it was not an isolated transaction.
Let’s take this one step further. If someone bought a house a couple of years ago and their taxable value became uncapped, ponder this. Their taxable value might be close to true assessment. Even though the value in their community may have diminished 1 or 2 percent. the assessor will raise the taxable value the lesser of five percent or the rate of inflation. Inflation may not necessarily be the same as real estate appreciation. So long as Taxable Value doesn’t exceed Assessed Value, that is how it will work. Isn’t good ole’ Prop A an interesting law?
When, on the Ides of March 1994, 2/3 of the voters wanted it, I was amazed. I would guess they had not read it through.
Yes, Gwyn, they do need to be prepared. I agree with you. If anyone clicks on the link in the article that says “bought a house in 2006″ they will come to a post I wrote on the topic last year. I offered to provide comps if people needed them. We routinely give them to our clients.
Lets hope Michigan figures out that this (Prop A) is a bad thing soon.
Thanks for stopping by.
Great post Mo!
And I love the new look. (Well, it may not be “newâ€. It’s new to me as I’ve been visiting via the feed reader and haven’t been “on blog†in awhile). The other one was a bit too greeny for me.
Proposal A was destined to hurt the Michigan real estate market, it was just a matter of time. A new buyer into a existing neighborhood can pay more than double the taxes of other similar homes.
The only homeowners with a prayer this review time are the ones whose taxable value and SEV are similar. If your taxable value is greater than 50% of the True Cash Value on January 1, you have a case……if you can properly document it.
Most peoples SEV’s are much larger than their taxable values. And those people will be paying 3.7% more tax this year.
Who are those masked men (or women) in the Real Estate Community that don’t see a problem with Prop A?
By the way……I love this new format.
Proposal A has caused city and state governments to start to bring their spending under control. It has allowed older people who have paid their dues to stay in their family homes when rising property taxes would have forced them out. A capped property tax doesn’t prevent me from moving, it allows me to stay.
A major problem with the real estate market today is that many homeowners have overpaid and over financed and cannot afford their mortgage payments. This has caused massive amounts of foreclosures and defaults. Much of the fault is with real estate agents steering people into homes they can’t afford, lenders pressuring appraisers to over value homes and appraisers who give into that pressure. Even the people that have cash are afraid to move because the market will probably get worse before it gets better.
Most first time buyers are not even aware of what their real taxes will be until well into the process. The taxes that will be assessed after a sale could easily be shown on the MLS tickets but instead the current owner’s taxes are listed. These numbers are of no significant use to a potential buyer. Personally, I think this practice is criminal especially when it involves young inexperienced buyers.
Thanks for listening
Interesting opinions, Patrick. I have been selling real estate full time since 2001. I don’t really talk to people about their personal finances. The buyers we work with are pre-approved by a lender and come to us telling us what they can afford. I work with them to find a home within those parameters. How can I steer them in to something they can not afford? They are the only ones who can do that because I don’t know about their finances. Nor do I need to know about them. I am not a financial advisor, so I am not qualified to give this advice. The matters of what someone can afford are best handled by professionals in that area, and I am not that. It is also unfair to blame everyone but the consumer.
As for not listing the future taxes on the listing ticket, I agree with you to some extent. Yes, it does present an inaccurate picture. Unfortunately, we cannot predict what the new taxes will be accurately. Dmitry and I discuss the property tax issue with every buyer the first time we sit down with them to discuss the purchase process. It is an extended conversation. We do give them ranges of where the taxes will be after a purchase and I would like to think that most Realtors do the same.
How do I get a copy of Prop A?