In the state of Michigan, especially for purposes of property taxes, houses undergo period official assessments. These are normally conducted by the county or municipality in which those houses sit. Specially-trained assessors work to gather essential information on assigned houses and then conduct assessments. These assessments are important to municipalities for a variety of reasons. One is that Michigan municipalities base much of their budgets off the taxes collected on the value of their housing inventories.
In Michigan, local school districts are funded through a combination of state aid and, most importantly, local property taxes. The taxes on a house are based on a number of factors. The most important of these is its assessed value. When houses are assessed lower than their actual value, a municipality's tax base can suffer, in other words. Lower taxes means less funding for schools as well as for other services such as police and firefighters.
The assessed value of a house takes into account a number of factors. One of the most important is the comparable value of houses similar to the one being assessed. For example, a three-bedroom brick ranch home in the neighborhood under assessment wouldn't be compared to a two-story four-bedroom colonial. In the real estate business, this is known as "pulling comps." Assessors will access a local real estate association's multiple listing service (MLS) to do this.
Home Improvements and Location
Assessors are also trained in pulling databases of building improvement permits. If a homeowner has had a dormer built, for instance, the chances are good that his home's value has risen. If a new central air conditioning system has been installed, its value may also have gone up. In addition, certain neighborhoods are more desirable than others. Assessors look at a neighborhood in terms of its desirability and the prices of all homes sold within it.
With information on location, comparable homes and any improvements, a quick exterior assessment is completed. A specialized computer program takes all that data and produces an individual value for each home being assessed. Homeowners can also appeal that assessment to a local review board based on rises or falls in local housing values. They can also have an appraisal of their home done by an outside appraiser. These are presented to the board and a final judgment rendered.
In Michigan, for homes owned as primary residences, assessed value doesn't completely determine taxable value. That's arrived at through what Michigan calls state equalized value (SEV). It's usually about half the assessed value of the house. For example, a home assessed for $200,000 might only have an SEV of $100,000. County and municipal taxes are paid twice a year, once in the summer and once in the winter. Residential taxes are normally based on that lower amount.
Tony Guerra served more than 20 years in the U.S. Navy. He also spent seven years as an airline operations manager. Guerra is a former realtor, real-estate salesperson, associate broker and real-estate education instructor. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies.