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Assessed Values and You; What you Need to Know before Seeing Your Assessor

By
Real Estate Broker/Owner with Towne Square Real Estate LLC

New property assessment valuations are due to be out to homeowners in February of every year.  Often when I'm working with sellers and inquire about their assessed values, few understand the meaning of this document and it's relevance to a potential sale of their property.

Even more important is understanding the relationship between your Assessed Value and your Taxable Value.  Homeowners are quick to argue their assessed values with their local assessor to "lower their taxes" not understanding how their taxes are calculated.  This short overview should bring quick understanding to the process.  Before I explain further, let's look into a couple of definitions:

True Cash Value - is a property's common selling price for that home, generally in keeping with the market value expected if sold.

Assessed Value - (A/V) generally considered 50% of True Cash Value.

State Equalized Value - (SEV) the value resulting after county and state equalization processes

Capped Value - is the parcels prior year taxable value times the Consumer price index or 5% whichever is of lesser value.

Taxable Value - (T/V) the lesser of assessed value or capped value, unless there's been a transfer of ownership during the year

OK, Karla, so what does all that mean to me??  Well to begin with in March 1994, Proposal A was approved by Michigan voters that made huge changes in the way Michigan properties would be taxed.  No longer would a property be taxed on the Assessed Valuation as in previous years, but a new Taxable Value came into effect.  The Taxable Value is what our property taxes are calculated upon.  (Taxable value x Millage Rate = Property Taxes

Taxable Value is increased by Capped Value per year, using the Consumer price index or 5% whichever is of lesser value.   If a property has been sold that previous year, a readjustment is often made to the sale price if within overall market values.  A home sold for $1 will not be adjusted to .50 cents, it is unrealistic.  It will be adjusted to 50% of general market value.

Interestingly, most homeowners view their Assessed Valuation as something to be disputed with their Assessor in hopes of lowering their Property Taxes.  When in reality, it is their Taxable Value they should be concerned about. 

More than ever, buyers and their realtors are very astute to assessed values and their relationship to what they should consider paying for that particular home.  If that homeowner has spent years in dispute with the assessor and has successfully had his/her Assessed Value reduced, it will not serve them well when trying to sell their home as their A/V will convey a message of lesser value in relationship to desired market price.

Buyers I work with are reviewing all aspects of information on a home of potential purchase, and a study of it's A/V quickly tells them if the property they are considering lines up with other properties of likeness.  Therefore, it is important for a homeowner to consider his/her decision in pursuing a lower A/V as opposed to lowering the T/V.  You may win the battle for taxes, but could lose the war when it comes to resale.

Lastly, if you feel your A/V and T/V are too high, it is a good idea to compile recent sales in your neighborhood of likeness to bring with you to discuss with your local assessor.  The assessors are usually reasonable, care about what they do professionally and are willing to discuss changes to values, especially in this unique housing market we are in.

 

 

 

Jim Thrower
Renewal Real Estate, Ltd - Grand Rapids, MI

Karla,

Excellent article,

The urge for home owners to dispute their assessed value is strong especially considering the current market conditions within West Michigan.  You make an excellent point in regards to those considering selling their homes within a short time frame and how it may do them more financial harm.

I have found that time after time those who challenge their assessed values with a professional appraisal have a higher success rate. My experience is that many of the local municipalities are looking for factual evidence not current listings and emotional motives.

Again excellent article.

Jan 30, 2008 02:16 PM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!
Excellent information and very good explanation.  Thanks Karla.
Jan 30, 2008 03:15 PM
Anonymous
Karla Huitsing
Jim,  Thanks for your comments.  This idea of always arguing assessed values has been on mind for several months as I keep meeting homeowners who have lowered their A/V to the extent that now it appears to buyers their home is not of good value in comparison.  You bring up a good point in that a good appraiser will also assist a homeowner and assessor with actual information on market value.  Thanks for the input. 
Jan 31, 2008 12:40 AM
#3
Anonymous
Karla Huitsing
Lola,  As always, great to hear from you.  I trust your 2008 will be blessed and prosperous.  Thanks for your comments.
Jan 31, 2008 12:41 AM
#4