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Archive for the 'Taxes' Category

Breaking News: Tax Credit for Home Buyers!

I think we can all agree the housing market needs a little kick in the pants right now! Well, your Federal Government to the rescue. This week congress passed a Housing Rescue Bill which will attempt to do a number of different things from foreclosure avoidance assistance, tax credits to some home buyers and financial assistance to neighborhoods to buy and rehabilitate foreclosed homes among other things. The bill is expected to be signed by President Bush and if so it will be become law.

What I would like to focus on in this writing is the aid for home buyers. The bill offers first time home buyers a refundable $7,500 tax credit (or 10% of the homes purchase price, whichever is less) for homes bought between April 9, 2008 and April 1, 2009. There is an income limit of $75,000 for single filers and $150,000 for couples filing jointly. The tax credit is reduced or eliminated for home buyers whose earnings exceed these limits.

This is significant! If you buy a house for $150,000, and your income qualifies you for the full benefit, then you would get a tax credit of $7,500! A full 5% of the purchase price is given right back to you at tax time. Wow, that should get some buyers who are sitting on the fence something to think about. Housing sales rely heavily on the domino effect; when one person sells their home they go out and buy another house and then that seller can buy something new and so on. More buyers in the market could really relieve some of the pressures and expand home buying exponentially! This is a step that could really help to get things back on track.

Wait, there’s more . . . . . . Fannie Mae and Freddie Mac (everybody knows who they are now) recently announced that they will buy loans in “stressed markets” (Southeast Michigan falls into this category) with only a 5% down payment! Formerly, you had to put at least 10% down. Now, to get 5% down you have to be a pretty solid borrower – at least a 680 credit score and 45% debt to income ratios, stable job and at least 5% of your own money for the down payment.

So, a first time homebuyer can get a massive tax credit and buy a place with only 5% down with conventional financing! Get your megaphone out and start trumpeting this around town. If you know anyone who has been considering buying their first home now there are even more reasons why it’s the perfect time to make the move. Home prices haven’t been this low in about a decade; mortgage rates are still great, first time buyers get a big tax credit and can get conventional financing with only 5% down!!

Tags: 2008 housing rescue bill, home buyer tax credit

Property Tax Relief For Those With Two Homes

I am clipping an interesting portion of an email just received from the Michigan Association of Realtors, witha bit of good news for those home sellers who are carrying two homes in Michigan.

Yesterday, Governor Granholm signed 3 significant pieces of REALTOR® supported legislation. First, legislation enabling home sellers to retain 2 principal resident exemptions for property still on the market after the seller has moved elsewhere in the state. The signing of this legislation is a huge step in aiding struggling sellers who have had homes on the market for over a year and have lost their principal residence status on that property.

House Bill 4215, now Public Act 96 of 2008 sponsored by Representative Ed Gaffney (R-Grosse Pointe Farms) enacts that the seller can retain an additional exemption for up to three years on property previously exempt as the owner’s principal residence if the following circumstances are met:

• the property is not occupied,
• the property is for sale
• the property is not leased or available for lease
• the property is not used for any business or commercial purpose

The Michigan Association of REALTORS® (MAR) was active in pointing out to lawmakers that the struggling economy in Michigan has forced several home sellers to relocate to other areas of the state, in some instances continuing to market a home that they have not lived in for over a year. As a result, the home was no longer treated as a principle residence and the homeowner lost the principal residence exemption. Retention of an existing homestead credit for an unoccupied home that is currently for sale would offer relief to sellers who have had to relocate for whatever reason. The MAR is grateful to Representative Gaffney for being receptive and following through on this very important piece of property tax relief.

I am left with a few questions after reading this.

1. If the seller has moved out of state, are they eligible as well?
2. Does this take place now?  The May 1 deadline for removing or replacing a property tax exemption and having it impact the coming tax year is almost upon us, so some people may need to rush to replace the exemption.
3. Can a previously removed exemption now be replaced?  I assume the answer is yes, but I don’t know.

Clearly, this is a great benefit for those who qualify.  The audience is probably limited, at least in Metro Detroit, where we are seeing transferees leave the state.  Also, many of those who would prefer to sell have turned to leasing in order to reduce their cash out flow each month.  These reluctant landlords will not benefit either.  This could actually help to reduce the number of rental homes coming to market, though I don’t think it will have a significant impact there.

Tags: michigan homestead exemption, michigan property taxes. homestead exemption, property taxes

Transfer Tax Exemption Could Offer Some Relief to Michigan Home Sellers

The following is a reprint of an email we received tonight from the Michigan Association of Realtors. It’s actually the first I have heard of this exemption, and it is exciting. I am going to have to do a bit more digging to see what this actually looks like when it is applied.

Attorney General Mike Cox issued an important opinion this week clarifying the proper application of an obscure exemption contained in the Michigan Transfer Tax Act. The opinion, arising out of a request from Representative Martin Griffin (D-Jackson), should afford certain home sellers immediate financial relief as Michigan’s real estate market continues its road to recovery.

Exemption “t”, as designated in the Michigan Transfer Tax Act, sets forth that a seller may seek an exemption from paying the state transfer tax if the following criteria are met:

With property values and corresponding SEV declining due to the struggling economy, home owners and real estate agents first took notice of the exemption’s possible applicability under the state transfer tax. However, absent an official interpretation, there was little awareness of its proper application.

The opinion from the Attorney General uses examples to show how the application would apply. One example illustrating application provides:

If the SEV of the principle residence when acquired in 2006 is $74,000.00 and the SEV when transferred in 2008 is $72,000.00 then criteria one and two above are satisfied. You can establish the true cash value by doubling the SEV at the time of transfer. In this case the true cash value is $144,000. If the sale price in 2008 is $140,000.00 then the sale does not exceed its true cash value. All three criteria are satisfied and the exemption would apply.

The Attorney General’s opinion provides immediate relief to home sellers already faced with the reality of declining value on their single greatest asset. The opinion also provides a uniform reading of the exemption that is necessary to provide consistent application among the various Registers of Deeds across the state as they are already receiving filings for the exemption.

Sellers should be cautioned that a request for the exemption that fails to meet all three criteria could bring a penalty equal to 20% of the tax assessed in addition to the tax due. Additionally, no similar exemption exists in the County Real Estate Transfer Tax Act.

Tags: michigan transfer tax, transfer tax

Taxes. Taxes. Taxes.

Source: ShutterstockWell, it’s really Millages. Millages. Millages.

I’m interrupting our series on Oakland County luxury homes today to bring you a post about property taxes. I was perusing a report on 2007 Oakland County Millage Rates and decided to see where we would find the highest property tax rates.

The winners:

• Lathrup Village, where the homestead millage rate is: 56.0830

• Oak Park with Ferndale Schools, where the non-homestead millage rate is 64.9183

I’ve uploaded the report so that you can do your own exploring of Oakland County property tax rates. Property taxes might help you decide where you’ll buy your next home.

Oakland County Millage Rates

Tags: Michigan Property Tax, Oakland County Millage Rates, Oakland County Property Taxes, Property Tax

Birmingham School District Landlords, Didja Know…

The real estate market has turned many a hopeful seller into a reluctant landlord (or SellLord, as I have dubbed them). Yesterday I got wind of something I have never heard of before, though I can understand the motivation.

A new tenant went to enroll her children in the Birmingham public schools. The admission process is lengthy she tells me, and one of the things she was instructed to do was make sure that the landlord had rescinded the homestead exemption on the home. Well, in Birmingham and in most surrounding areas, there is a significant differences in the amount of taxes due on a non-homesteaded property. The school official told her that those funds are used for school funding, hence the district’s interest in ensuring that the exemptions are correctly rescinded.

Perhaps Birmingham has been doing this a long time. I don’t know. I also heard a rumor that either the school board or the district was researching all of the currently enrolled students living in rentals to make sure their rental home owners were paying non-homestead taxes. This is just an unsubstantiated rumor though.

Will the district enroll a student living in a rental where the homestead has not been rescinded? I assume they will. I also assume they *might* pursue some owners who have not properly rescinded, though it could be difficult proving when the property became tenant occupied if a tenant’s child was not enrolled in school.

It is a certainty that the schools and the municipalities need the funding that is due them in these tough economic times. As a property owner who has long paid non-homestead taxes I would like to think that others also willingly accept this responsibility when they rent out a home, even though I have never thought the property taxation method for non owner occupied homes was fair.

Birmingham Public Schools serve some residents of Birmingham, Beverly Hills, Franklin, Bingham Farms, Troy, Southfield, Bloomfield Hills and West Bloomfield. District Map.

Property Tax Assessment Time Again

.flickr-photo { border: solid 2px #000000; } .flickr-yourcomment { } .flickr-frame { text-align: left; padding: 3px; } .flickr-caption { font-size: 0.8em; margin-top: 0px; }Just a friendly reminder that if you are concerned about your latest tax assessment, NOW is the time to be working on an appeal. Each municipality has it’s own review board with scheduled dates for presenting your case for appeal.You will need to appear in person. You should be armed with comparable sales and your purchase agreement if it was a recent purchase.

This year I’ve seen some strange assessments of neighboring houses that were relatively comparable. In Birmingham I saw 2 similar homes, where one had a 7% increase in its assessment and the other had a 7% decrease. Neither had transacted recently and they are within a block of each other.

You have a narrow window of time to contest your assessment, so get cracking!

Also, I haven’t received my assessment notice from the Village of Beverly Hills/Southfield Township, Will have to make a call to them tomorrow. Be proactive!

2007-09-02, Photo by echovein.com.

Michigan Millage Rates By County

If you are interested in local millage rates, this is the definitive source for 2006.  As soon as the 2007 publication becomes available, I will publish it here.

Oakland County property tax rates begin on page 110.  I did notice a mistake under the Birmingham City section.   I am not aware of any homes in Birmingham that are assigned to Pontiac Schools, and I honestly doubt that category exists.  There are parts of Bloomfield Township, notably the area by the exclusive gated community, Turtle Lake, that are part of the Pontiac School District.

[tags]michigan property taxes, michigan millage, oakland county property taxes, birmingham mi millage rate, bloomfield hills property taxes[/tags]

Lower property taxes on the horizon for Oakland County

Could there be a silver lining to the increasing number of foreclosures in Michigan? Maybe. Maybe not.

The State of Michigan just changed the laws allowing foreclosures to be taken into consideration in property tax assessments. Previously the depressed sales were disallowed as aberrations. In Oakland County areas particularly hard hit by foreclosures, like Pontiac, Hazel Park and Southfield, this could result in as much as an 8% decrease in assessments.

The State Tax Commission also changed rules allowing sales studies to be based on one year of sales instead of two. The two year ruling had helped to keep assessments low during periods of rapidly increasing sales prices, but it also kept assessments high during periods of rapidly falling prices.

Combined, these two changes could have a significant impact on assessments, but most home owners who have been in their homes for more than a few years will not see any difference in their taxes because of the current cap on property tax increases.

Figuring in foreclosures and doing one-year sales studies beginning next year will mean that overall residential assessments will fall even in wealthy Oakland County for the first time in at least four decades, said Dave Hieber, the county’s equalization manager.

He predicts 7,800 foreclosures in the county by year’s end. That, combined with falling prices in other home sales, will drive down property values an average of 5%, he said.

For more information read the article from the Detroit Free Press.

[tags]oakland county property taxes, oakland county foreclosures, property taxes[/tags]

photo by Ulleskelf

Peeing Dogs Do Not Sell Homes: A Lesson For Sell-Lords

Yesterday I had one of my top 10 most memorable showings. This is a list that you don’t want to be on as most of those showings tend to be memorable for bad reasons, like finding people asleep in beds when you think the house is empty. That is always good for a fright.

Our Metro Detroit market is currently swarming with sellers who, because they can’t sell, are considering leasing and becoming landlords. Since there are so many of them out there, I think they deserve a name and I am dubbing them Sell-Lords. Most would rather be sellers but they would like a bit of relief from the monthly payments so they are listed for lease as well. Or they are waiting out this buyers market by leasing until things pick back up. They’ve also contributed to a softening in the rental market by bringing up the supply there, but that is another story.

Back to yesterday. . .

I opened the unlocked (don’t tenants lock doors?) door of a $500,000+ Birmingham home and saw a huge great dane staring at me from the living room. Apparently I excited him because he peed right where he stood. On second thought, maybe he was a she — there was no leg lift involved. Anyway, I am not fond of dogs on the loose in houses when I am showing them, so I was glad when he trotted off into another room to hang out on the couch. My clients and I walked into the home and saw big shiny puddles of pee all over the place from where we stood in the foyer. So far we were off to a bad start. It didn’t get better with piles of laundry everywhere, and a high level of filth that distracted from what might be a nice looking place under different circumstances. So, NO SALE from us. Sorry Mr. Sell-Lord. Your tenant blew it for you.

Not that there are not good tenants out there. We have some friends who are temporarily renting a place that is on the market for sale. The listing agent told me how much nicer the house looks with my friends’ pretty things in it. Shows better than it did empty so that should help the owner get an offer.

I know it is almost an impossible task, but a homeowner needs to be extra selective of tenant for a home that will remain on the market for sale. Your home will not sell with a slob inside. Or with someone who makes showings difficult.

The issue sellers NEVER think about before they lease:

• Non-homestead taxes. If the home is no longer your primary residence you will have to remove the principal homestead exemption and your property taxes on the home will increase. Don’t forget this when you are calculating your cash flow needs before you rent. The higher taxes will also create objections when you eventually sell it because the non homestead tax rate could remain in place for up to one year for the prospective purchaser, making your home considerably more expensive than a comparable home with homesteaded taxes.

The cost to the Sell-Lord from taking on the wrong tenant could very much outweigh any short term benefits of rental income. If you find yourself in the situation of having a tenant who is making your home “sales proof” talk to them first and see if you can get some cooperation. Bribe them if you have to. If none of those things work, do yourself a favor and take the house off the market until after the tenant is gone. A lengthy history on the MLS is not going to help you either.

photo of Gus by SFSteve

[tags]selling a rental home, tenants, selling a michigan home[/tags]

Breaking News: Pop Up Tax Moratorium Stalls for 2007

Just received news (not good news) from Lansing that the proposed moratorium on the pop up tax is not likely to come to be this year. We were looking at it as a short term stimulus for the housing market and were optimistic that it would have helped to motivate home buyers over the coming 18 months. We’ve long felt that a bigger fix is needed for our property tax legislation, but we were at least happy for the bandage that the moratorium would have supplied in the short term. Obviously the State’s budget crisis will not allow for a loss of $90 million in revenue that this time, but the housing market could use a bit of assistance too.

[tags]michigan real estate taxes, michigan pop up tax, michigan property tax, michigan property tax moratorium, proposal a, headlee amendment[/tags]