Maria is purchasing a home in Detroit, Michigan for $280,000. Her agent explains that Michigan's Proposal A created a system where a property's taxable value is capped each year, but 'uncaps' upon a transfer of ownership. If the home's current taxable value is $90,000 and the State Equalized Value (SEV) is $140,000, what will the property's taxable value reset to after Maria purchases the home?
Correct Answer
B) $140,000, because the taxable value resets to the SEV upon transfer of ownership
Under Michigan's Proposal A (1994 constitutional amendment) and MCL 211.27a, when a property is transferred (sold), the taxable value 'uncaps' and resets to the State Equalized Value (SEV) for the following tax year. The SEV is set at 50% of the property's assessed market value. In this case, the taxable value will reset from $90,000 to the SEV of $140,000, which may significantly increase Maria's property tax bill.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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