Many seek to appeal their real estate tax bills

As Michigan's economy slid last year, Barbara Roden knew the value of her Northville Township home had dropped well below what appeared on the tax rolls.

After her real estate agent documented recent sale prices, the local board of review agreed and dropped her home's taxable value by $30,000 -- cutting her annual tax bill $1,400.

Some of her neighbors worried such victories could crimp the township budget, threatening services, but Roden doesn't see it that way.

"It's not pretty right now," said Roden, 47. "They are going to have to make the cuts that I've had to make. I'm not paying the maximum just for them."

Roden was one of thousands of metro Detroiters seeking tax relief last year, and assessors said they expect even more appeals next month when residents can contest this year's assessments.

The annual board of review, a panel of residents that hears local property tax appeals, is a homeowner's best chance to lighten the tax burden in a down market.

Assessors warn that despite sale prices that have fallen an estimated 21% in the past year, about half of metro Detroiters still could face property tax increases because of quirks in the law.

For owners who do plan to appeal, experts say data are the key to making your case.

"The assessment is assumed accurate, and the burden of proof is on the petitioner," said Holly Adams, an appraiser in Northville Township's assessing office. "It could be that one person provides information and the other did not."

Homeowners can hire professionals to make their appeal, but many do it on their own.

Local governments keep copies of property transfer affidavits, listing home sale prices, in their city or town halls. Many municipalities post them on their Web sites or keep them in binders at the counter for curious residents.

"We have them organized by subdivision," said Dave Hieber, director of equalization for Oakland County, which provides assessing services for 26 local governments. "We're not going to make you go through every sale."

Hieber said people who have owned their home for years are most likely to see tax increases because of the way the law works.

"There are still a substantial number of taxpayers who are going to see a tax increase," Hieber said.

Fight against assessment

Caroline Littlejohn, 37, of Warren plans to fight the assessment on a Roseville home she is repairing before moving in with her husband and two children next week.

Her mother, Dawn Ricker, got a great deal on the 1,150-square-foot, three-bedroom home at a foreclosure auction in January, paying $23,500 for the house, which last sold for $123,500 in 2003.

The tax bill on it tops $3,600 annually because it's assessed as if it would sell for about $120,000. Ricker, 58, of Sterling Heights said comparable neighborhood homes have sold for $60,000 to $70,000 recently.

"I have owned a few houses over the years and thought the tax base on the house would be adjusted according to what I paid. Apparently, this is wrong," Ricker said.

The first thing homeowners should do when they receive their tax assessments is find the line listing taxable value and double it.

If that figure is about what the home would sell for in today's market, an assessment appeal is unlikely to reduce the tax bill, said David Nykanen, a real estate attorney with Steinhardt Pesick & Cohen in Birmingham who specializes in property tax appeals. If it isn't, they may have grounds for an appeal.

"People often confuse 'I'm paying too much in taxes' with 'I'm over assessed,' " Nykanen said. "If your property is properly assessed, then your argument is really with the millage rate and not the assessment."

A quirk in the law

Many homeowners are frustrated when their taxes rise even as the market value of their home drops. That's where the quirk in the law comes in, he said.

Voter-approved Proposal A, which took effect in 1995, uses two separate statistics on a property -- state equalized value (SEV) and taxable value.

The SEV should be one-half of what the home is worth in the current market. Taxable value is what the local governments can tax against.

When Proposal A passed, the two numbers were the same.

But after that, Proposal A capped the annual increase in taxable value to 5% or the inflation rate, whichever is lower, even when the SEV was rising much faster, Nykanen said.

In an up market, the provision protected homeowners from large tax increases each year. But in a down market, it has the opposite effect.

Homeowners don't see a tax reduction until their SEV drops below their current taxable value.

"The whole point of Proposal A was to control the rate of increase of tax bills," Nykanen said. "It was not to guarantee that the tax bill would go down because values went down. It was for the predictability of taxes for owners and municipalities."

Many homes close the gap

Assessors estimate that between 45% and 55% of homes in metro Detroit have now closed the gap between taxable value and state equalized value, meaning those property owners will see lower taxes every time the SEV drops.

Next year, that number will be even higher if prices continue to fall.

"We had one of the most dramatic decreases of property values in modern times in the last two years," he said.

"If your taxable value equals your SEV, the minute you prove the property is worth less than the community thinks it's worth, you are saving tax money."

For homeowners who strike out at the local board of review, many appeal to the Michigan Tax Tribunal, an administrative court process in which a panel of lawyers, assessors, accountants and appraisers preside.

Appeals there have more than doubled in the past five years to 10,343, up from 4,066 in 2004, and so has the case backlog.

Some homeowners wait three to four years to get a hearing, and in the meantime, they must pay their taxes.

Contact JOHN WISELY at 248-351-3696 or jwisely@freepress.com.