A Detroit home has a true cash value of $280,000, a State Equalized Value (SEV) of $140,000, and a taxable value of $95,000. The property is sold to a new buyer. What will the taxable value be for the first tax year following the sale, assuming the SEV remains $140,000?
Correct Answer
C) $140,000, because taxable value uncaps and resets to the SEV upon transfer of ownership
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 year following the transfer. Since the SEV is $140,000, the new buyer's taxable value will be $140,000 in the first tax year after the sale. This uncapping can cause a significant increase in property taxes for the buyer — in this case, jumping from $95,000 to $140,000 in taxable value.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
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