A Michigan homeowner, Patricia, has lived in her home for 15 years. Her home's current taxable value is $85,000, and its SEV is $175,000. She is considering selling to an investor who will not occupy the property as a primary residence. Patricia's agent wants to advise the investor about the likely tax impact of the purchase. Which of the following most accurately describes what will happen to the property's taxable value after the sale closes?
Correct Answer
B) The taxable value will increase to $175,000 because it uncaps and resets to the SEV upon transfer
Under Michigan's Proposal A (MCL 211.27a), when a property transfers ownership, the taxable value 'uncaps' and resets to the State Equalized Value (SEV) for the following tax year. In Patricia's case, the taxable value will jump from $85,000 to $175,000 (the SEV). This can represent a dramatic increase in property taxes for the new owner and is a critical piece of buyer counseling in Michigan real estate transactions.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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