Marcus is a licensed salesperson helping buyers purchase a home in Kalamazoo. The home's current taxable value is $85,000, but the SEV is $130,000. Marcus knows the property will sell for $260,000. What is the most important tax-related disclosure Marcus should make to his buyer clients?
Correct Answer
D) After closing, the taxable value will uncap and reset to the SEV of $130,000, significantly increasing property taxes
Under Michigan's Proposal A (MCL 211.27a), when a property is sold, the taxable value uncaps and resets to the SEV for the year following the transfer. In this case, the taxable value will jump from $85,000 to $130,000 — a 53% increase — which will substantially raise the buyer's annual property tax bill. This is a critical disclosure that agents must make to buyers so they can accurately budget for post-purchase property taxes.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
Highest and best use is an appraisal concept that identifies the most profitable, legally permitted, physically possible, and financially feasible use of a property. It is the foundation of all property valuation.
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- → The income approach to appraisal is most commonly used for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → External obsolescence in Oklahoma:
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- → Which of the following correctly lists the three types of depreciation recognized in real estate appraisal?
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- → Which four tests must a use satisfy to qualify as the highest and best use of a property?
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