As a certified state tax assessor for the State of Michigan I have seen the havoc that has been wreaked upon innocent homeowners who have been denied their simple right of information. When a young couple buys their first home there should be a mandatory class that instructs new homeowners of the liabilities that go along with homeownership.
This responsibility should fall on the shoulders of the realtors that are selling the homes and gaining commissions, who, by not being totally honest with consumers, are setting a lot of new homeowners up to fail.
First, if an ad for a piece of property tells you what the taxes will be on the property this should be your first red flag. Any assessor will tell you that the assessed value of your home is half of market value. This does not necessarily mean that it is half of what you paid for it. There are a lot of factors that make up the market. You may have gotten your house for a steal because the former owners had to move in a hurry. This is not an indicator of market value. You may have built your house. What costs you have into building your home is not an indicator of market value either.
What one must understand is that when an assessor values your home for the next tax season they are doing it on a sales study that actually ended on March 31st of the previous year.
Even though you are told that your assessments reflect current market value, you can see that this is not true. If it were true we would be using a more current study. So be aware that just because the market is down now, doesn't mean that it was down during the used sales studies. The reality is that it will take another year before those downward turns are realized in your assessment.
The second most important thing to know as a potential new homeowner in Michigan is that, if the home you're buying is going to be your primary residence, you most likely are qualified for a Principal Residence Exemption which entitles you to an exemption from the 18 mills school operating tax in your jurisdiction. There is a catch though and it's called Magic Monday. Even though the date doesn't necessarily fall on a Monday, that is what it is called, and that magic date is May 1st.
As a new homeowner you need to know that if you move into your home after May 1st, you will not be eligible for the Principal Residence Exemption until the subsequent year. This can cost you hundreds, if not thousands of extra dollars you many not have been expecting to spend. What makes the matter worse is that the winter bill arrives right before Christmas. I have had many new homeowners quite upset because they were never told about this date and therefore were unable to make a decision regarding their move based on good advice.
Let me show you an example of what the lack of this advice can do:
Homeowner No.1 buys a home and moves in on April 30th, where Homeowner No. 2 buys the home next door and moves in on May 15th of the same year. Both homes are identical in assessments and taxable value. We will assume that the jurisdiction carries a 42.3569 homestead millage and a 60.3569 non-homestead millage.
For Homeowner No. 2, the lack of knowledge was costly. How many families can afford a $3,600 surprise bill? Not many I can assure you. If this is a young couple starting out, this could mark the failure of their homeowner dreams, all due to the lack of knowledge.
Scenarios as presented above can cause devastating consequences to families. The reality is that it can be corrected for the future. This type of information is necessary for people to have, before they make one of life's more important decisions, to buy a home. All states should mandate classes for the potential buyers out there to ensure that they are getting the information they need to make good sound decisions when making such important life purchases. This would achieve a major advancement in conquering the problems that we are now faced with in the housing market mainly due to lack of good information to the consumer.
