Michigan's Pop-Up Tax

By
Real Estate Agent

How many times have you been conducting an open house when a potential buyer asks, "What are the taxes?"  Not "What is the SEV?"  No, the question was, "What are the taxes?"  Now, not to pick on those of us with greying hair, but it often seems the question comes from those born sometime before 1965.  Or, if it comes from a first-time home buyer, it's on a list of notes Mom & Dad gave him or her to ask. 

What's even more surprising to me is when a licensed Realtor asks me that question.   

After 14 years, you'd think folks would have caught on that the rules changed back in 1994.  The tax bill the current owner pay may not even remotely resemble the tax bill the new owner will receive.  Why?  Because the amendment passed in 1994 created was is called "Taxable Value."  While SEV's can continue to rise based on market inflation, the taxable value could only go up 5% a year or the rate of inflation, whichever is less.

So, when a buyer chooses a home that has been owned by one owner since 1994, the new buyer can be certain the tax bill he will pay will be considerably larger than the one the seller pays.  Why? Because the taxable value for the new owner wil be the same as the SEV (which has typically been increasing faster than the taxable value for the past 14 years.)

If you are a Realtor holding an open house and you answer a buyer's question, "What are the taxes?" with a dollar amount and without the disclosure that a future buyer's tax bill will be higher, it is misleading. The buyer isn't asking the question out of idle curiosity or an effort to make small talk.  He/she is asking the question to gain decision-making information. 

Since 1994, my answer to that question is:  "The SEV is $(amount) and the millage rate for this township is $(amount).  By my calculations, you can probably expect to pay somewhere about $(amount) in property taxes each year."

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Rainer
10,039
Jason Gault
Real Estate One - Brandon, MI
Real Estate Agent, Ortonville, MI
Excellent post, although I would add one disclaimer to that statement. I always tell potential buyers pretty much the same information, but I also add that they should always check with the municipality (and generally I have the number handy) as I am just estimating the numbers and there may be additional information that could influence the total tax bill (such as pending special assesments, etc...)
Apr 09, 2008 06:35 AM #1
Rainer
49,477
Don Phelan
Grand Rapids, MI
Five Star Real Estate
Yes, Jason, Excellent disclaimer!
Apr 10, 2008 05:26 AM #2
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Rainer
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Don Phelan

Five Star Real Estate
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