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Monday, February 25, 2008

Property tax appeals projected to skyrocket

Posted by Carol Marshall February 07, 2008 01:41AM

Residential and commercial properties have steadily decreased in value over the last four years, enough of a decline that experts say this year's assessments are likely to spur exponential increases in tax bill appeals.

One local expert projects a 1,500 percent increase in the number of property tax appeals in Metro Detroit, and few municipalities may be equipped to process them all after they send out there 2008 assessments in February.

"What I've been telling everyone is this: As soon as you get what we call your 'pink slip' from the county - the paper that tells you what the value of your property is, and what your SEV is - call to make your appointment to appeal," said Phil Seaver, owner of Bloomfield Hills-based Seaver Title. "As soon as you have it in your hands, you need to make that appointment or you may not get one."

Seaver is pessimistic that there will be enough appointment slots for everyone who wants to appeal their tax bills because even though property values have fallen by some 23-27 percent in the last four years, he's not heard of any communities which are adjusting staffing levels or making plans for what he believes will be a huge wave of appeals.

At the same time that property values are falling, tax bills are increasing, Seaver said.
"Many municipalities are expecting shortfalls in their budgets, due to falling property values, and few are inclined to scale back tax rates or to assess properties based on the realities of the market," Seaver said. "Unless there are dramatic reductions on tax bills, we're going to see a large wave of appeals. And that will depend on whether assessing departments take into account reality or fiction."

The drop in property values is closing the gap between taxable values and property values, which allows property owners to appeal their tax bills, according to Seaver.

"Property values have fallen more this year than in any other year, which puts a very high amount of properties onto that thin line where the SEV may indeed exceed the taxable value," Seaver said.

Further, anyone who has bought and sold property could qualify for an exemption in the state transfer tax, Seaver added.

"If the current SEV is lower than when you bought your house, you do not have to pay that state tax of $7.50 per $1,000," he said. "That provision was rarely used before. Now every listing is being reviewed by knowledgeable listing real estate brokers on every property, particularly if it was purchased in 2001 or later. Because of this clause and the reduced volume, the amount of taxes paid to the state for transfer tax will be dramatically reduced."

When it comes to the appeals process, businesses go through the same steps as homeowners, Seaver said.

"You have to go through the local board of review, and if you disagree there, you go to the tax tribunal at the state level," Seaver said.

Tom Richardson, co-president of Liberty Title Co. in Ann Arbor, Rochester, Detroit and Jackson, said the appeals process comes down to an issue of fairness.

"I think people are going to fight their tax bills. We're going to see a lot of that this year, I think," Richardson said. "Proposal A worked 15 years ago. But now we have properties uncapping after 15 years, and it's prohibitive when it comes time to sell. Besides, there is the drop in values and increase in taxes, which doesn't make sense to most property owners.

"Fair is fair. When property values go up, the local taxing authorities should be able to collect more. But when property values go down, so should the tax bills."

Further, he said, assessors are sometimes selective when it comes to staying current on assessments, which can create unequal treatment within a community.

Rick Mangen, who is on Pittsfield Township's board of review, is expecting a busy season after tax bills go out this spring.

"We're anticipating being much busier this year than we were last year. Last year was a bit of an uptick," Mangen said. "We'll be even busier because people have bought into the fact that there is a real estate problem, and it doesn't make any sense to them when their taxes go up.

"The average homeowner doesn't understand very well how property taxes work."

In some cases they have tried to sell their homes, and the assessor's evaluation is an average. Whereas if you have the house appraised today, you're getting at what is the market value today."

Most people who appeal lose, he said, largely because the mass appraisal process is different than individual appraisal process.

"The mass appraisal process has worked in our favor as homeowners since World War II. Just pick a year, and your market value may have been two times your SEV. That's because the mass appraisal process uses a two-year sales study," Mangen said. "Some of those figures are more than 2.5 years old. And no one complains until we run into an interruption. Then that same process works to our disadvantage and a lot of people are incensed."

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