Every year about this time homeowners receive their State Equalized Value or SEV in the mail.
That's usually about the same time our phone starts to ring asking us "why did my taxes go up". This year it's "why did my taxes go up if home prices are falling ". So this year I am going to explain it the best I can - since the state does not make it easy to understand.
Okay here goes (and Dad, I hope you are reading this):
First there are 2 values - one is a Taxable Value and the other is the State Equalized Value. The taxable value is the value at which you are taxed and the SEV is what the state or city feels you home is worth divided by 2.
Now before you start screaming at the computer and tell me homes are not selling for that in your neighborhood - let me explain. The city/township assessor does not determine the value on each individual home. What they do is randomly take a certain number of homes sold, put them into a computer and determine what the average sales price would be, for a home like yours. They also do not track home prices; so if you buy a foreclosure for 30% under market that does not mean your SEV will come down. Your SEV will still be based on the average sales price.
To better understand how all this works let's look at the history behind it. In 1994, Proposal A was passed. Since then, when you purchase a home, you assume the seller(s) SEV. At that time their Taxable Value is uncapped and the new taxable value and SEV become equal. Then each year your taxable value goes up by the CPI (Consumer Price Index) usually 3-5% per year, however, it can not exceed 5%. Whereas, your SEV can go up as home prices go up. Which is what happened in this area from 1994 until about 2004.
Now let's say you bought a home in 1994 for $200,000 and the SEV at that time was $100,000. As stated above your taxable would also become $100,000. The chart below uses my example a CPI of 3% every year and the average sales data in Macomb County.
As you can see the SEV's went way up but over the past few years they have been going down. However, they will not effect your Taxable rate Until they are the same as the SEV. Once this happens your SEV will push your taxable down. This explains why your taxes may be going up while property values are dropping. Proposal A states that taxable values can not exceed SEV's.
Back to the question Should I fight my SEV?
The information below may help you determine if you can and should
- According to the cities/townships 2009 assessments are based on sales data from October 1, 2007 - September 30, 2008. However, according to those that appeal taxes this is not true.
- SEV reductions will only reduce your taxes IF your SEV pushes your taxable value down. But this can also help you when selling your home.
- The city/township May use distressed properties like foreclosures or short sales in their sales data.
- If you feel your SEV is to high hire a professional to help you appeal it. Harold Hoyt at Professional Property Tax Appeals is one of many in the area.
Stay tuned for more information on Millage Rates and how Property Taxes can effect your mortgage payment. Feel free to contact with any questions you have regarding the above information or leave a comment below.
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