March, Time Again for Reviewing your Property’s Assessment

By Micheal R. Lohmeier, ASA, MAI, SRA

In the March 2011 issue of Michigan Realtor magazine, Micheal R. Lohmeier, ASA, MAI, SRA, gave some very helpful pointers in his article “March, Time Again for Reviewing Your Property’s Assessment.”  We have taken excerpts from his article that will provide you with a better understanding of the process.

Estimating Property Tax

To estimate your property tax, take your property’s taxable value and apply it to the applicable local millage rate.  As an example, if your taxable value is $100,000 and your millage rate is 37.000 (one mill = 1/1000 of $1), then it is calculated by multiplying your taxable value by the millage rate: $100,000 x 0.0370 (37.000/1000) = $3,700. Local administrative fees may apply and would be based on this property tax amount.

Review Your Assessment and Meet Your Assessor

Every year your local assessor determines the assessed and taxable values of your property. If you disagree with your property’s assessment, then your first opportunity is to schedule a meeting with your assessor. Do some homework before the meeting. Pick up copies of your assessment records (i.e., valuation calculations and sketches of any improvements) and review them for mistakes. Double-check your property’s site and building sizes, condition and other physical characteristics. Sometimes a correction in a property record can resolve a valuation disagreement.

Review your assessment to determine if the assessor considered any negative features or influences that may detract from your property’s use and value. This may include items such as inadequate drainage, adverse easements, recent rezoning, heavy traffic (for residential property) or inaccessibility and exposure problems (for commercial property), inefficient heating and cooling systems, structural defects, and the like. A good rule of thumb is that if you find a feature to be a nuisance in using your property, then maybe the market might as well. For example, a residential property that has an attached garage but no access from the inside of the house may cause obsolescence (loss in value).

If you find mistakes on your assessment records, bring them to the assessor’s attention. Generally, assessors will need to visit the property to view any physical errors personally, but most are receptive to do so.

The assessor maintains a listing of sales in its office. Review the listing to determine what sales the assessor considered. I often suggest that taxpayers meet with a local appraiser or Realtor to help in collecting additional comparable properties.

Generally, for residential owner-occupied properties, listings and sales are useful.

If you go through the effort to collect comparable property information, then also go through the effort to present it clearly to the assessor. Keep it simple for the assessor. An owner will often bring in dozens of comparable properties and ask the assessor to wade through the information and make sense of them. Next to bringing in no information, that is the worst strategy to take because you’re leaving the information open to misinterpretation.

Take the information you collect and put it into tables similar to what you would see in appraisal reports or brokers’ market analyses. Array your information in a table comparing the comparable properties to the subject property. Organizing the information constructively and logically helps the assessor understand how your property measures up with the comparable properties you’re providing. Try bracketing your property between a comparable property that is overall inferior to it and one that is overall superior to it.

One thing to keep in mind is that an assessor cannot simply take a property’s sale price and use that price automatically as the basis for its value. That’s called chasing sales and it’s illegal. The assessor has to independently determine what the property is worth and has to consider others sales similar to it. Assessors try to determine if sales are market value-level, so help the assessor understand the conditions that surrounded your property’s sale including: rights of ownership conveyed; financing involved in the sale; conditions of the sale (buyer and seller relationships and motivations); and if any expenditures were necessary to the property immediately after the sale (e.g., new roof needed).

March Board of Review and Michigan Tax Tribunal

If you’re unable to resolve your disagreement with your assessor, there are two options: the March Board of Review and the Michigan Tax Tribunal.

For residential and agricultural real property your next option is to schedule a protest to your local March Board of Review. Your assessor can provide the dates and times available to meet with the Board. It is a similar process to meeting with your assessor; you need to bring information to the Board that supports your contention of your property’s value. You’ll receive a written decision by the Board after it concludes, typically early- to mid-April. If you disagree with the Board’s decision you can then protest that decision with the Michigan Tax Tribunal by July 31.

Important Terms

The following terms should be understood if you decide to talk to your local assessor or protest your assessment:

  • True cash value

The amount the assessor believes represents your property is worth. It reflects the property’s usual selling price as of December 31, 2010 (i.e., tax day for 2011 assessments). It is considered synonymous with fair market value.1

  • Assessed Value

This is typically the same as state equalized value, unless a factor is applied where the property is located.  It represents 50% of your property’s true cash value.

  • Taxable Value

This is the value upon which your taxes are based. It is the lesser of a property’s assessed value or its capped value. In the year immediately following a transfer of ownership, your assessed and taxable values are the same.

A property’s capped value is required to be calculated each year. The 2011 capped value formula is: 2011 capped value = (2010 taxable value – losses) x (lesser of inflation rate or 1.05) + additions. The State Tax Commission’s Bulletin 16 of 2010, Inflation Rate provides that the inflation rate multiplier for use in 2011 capped value formula is 1.017.2 Local units cannot develop or implement a rate other than the 1.017 in 2011.

Losses result from any physical removals, or destruction, to the property (such as removing a garage); while additions result from physical improvements (such as adding a garage).

Hardship Exemption

Due to the financial crisis that many Michigan residents are encountering today, I want to make sure you are aware of hardship exemptions, which are not a part of a property’s assessment.

A hardship exemption provides relief for persons that are unable to contribute fully to the property tax burden of their principal residence due to their economic status.3 The exemption has to be approved by the Board of Review. A taxpayer interested in reviewing the requirements should schedule an appointment to meet with its local assessor and obtain the necessary requirements and application forms. This exemption has to be applied for and granted annually.

 

Micheal R. Lohmeier, FASA, CMAE3, CRP, MAI, RES, SRA is an AQB certified USPAP instructor and former Michigan Tax Tribunal judge. He currently serves as Assessor for the City of Auburn Hills. He can be reached for further comment directly at 248.370.9436 or by email at mlohmeie@auburnhills.org

1 MCL 211.27.

2 Issued on October 26, 2010.

3 Michigan General Property Tax Act, Section 211.7u(1). 

This story is brought to you by MiCREA

The Michigan Council of Real Estate Appraisers was created in 2004 with one purpose: to serve Michigan’s REALTOR®-appraisers through advocacy, benefits, data resources, and educational offerings.  The Council, steered by a committee of fifteen appraisers representing more than 2800 members, is Michigan’s strongest voice for the rights and needs of appraisers in the state. The services and value MiCREA provides to its members complement in numerous ways the services provided to members by their local associations and appraisal organizations. For more information on MiCREA, visit Michigan Realtors

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