Appealing property tax in Ferndale, Michigan

Detroit, Michigan
Legal & Legislation
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Appealing property tax in Ferndale, Michigan

Tzvi Keisar
Member since 2021 · 13 posts · 7 votes

Hi,

The appraiser in the city of Ferndale, MI decided that my rental property value increased by over 20% YoY from when I bought it in June 2024. I have an appraisal from June that year with value of 180k, while the county assessor decided it is 225k this year. There were no renovations done since purchase.

I missed the appeals window (I received the mail late February and the window closed early March). Now the equalizer says I can go to the Michigan Tax Tribunal, but since there is no appeal in the Board of Review, there is a slim chance they will accept the appeal.

Has anyone been in this situation before and can help me understand my next step? Should I appeal to the Tribunal? it is a $250 fee and according to the equalizer it is money down the drain...   should I sue the city/county? any recommendations for a good property tax lawyer?

Thanks in advance!

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  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    1y

    Forget about suing anyone. There's no point to that. There's a very clear process for tax appeals in Michigan and you missed the window (this year). Your next real chance is next year.

    That said, do you fully understand your taxes? What was the State Equalized Value (SEV) when you purchased your home? Properties in Michigan become "uncapped" the year after purchase and taxes are moved up to the current SEV from the previous owner's old taxable value.

    It's a bit complicated but I have some blog posts on it if you'd like further reading.

    I've appealed taxes on all of my Detroit rentals (12 of them) and I've been successful every time. Not once have I had to go to the Tribunal. That said, I believe it's reserved for those that are not satisfied with the results of the Board of Review hearing... think of it as the final appeals court in this decision process. 

    I don't believe you can simply skip the initial appeal (almost always denied) and the Board of Review hearing and go straight to the Tribunal. But I could be wrong.

    Short story... you're likely out of luck until next year.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    1y

    @Tzvi Keisar we just appealed 5 properties for our clients - won 1, the other 4 were denied, so we'll be appealing to State Tribunal. 

    Don't get your hopes up about getting a State Tribunal application accepted if you missed the Assessor appeal:(

    NOTE: the Assessor bases the State Equalized Value (SEV) on the market value, NOT what you paid for it. You would have to prove their market value is too high.

    Below is everything you need to know about how Michigan Property Taxes work, DM us with additional questions:

    Michigan has some of the most complicated property taxes in the USA. Here’s what to know.

    State Equalized Value versus Taxable Value

    Back in 1994 Michigan passed the Headlee Amendment:

    (http://www.legislature.mi.gov/(S(k5m2va1uyfgwtbyjf4nqb1bx))/mileg.aspx?page=LoadVirtualDoc&BookmarkID=6536)

    that capped annual increases to the Taxable Value of a property to the lower of 5% or Michigan's Cost of Living increase. This was done to protect senior citizens on fixed incomes from being forced to sell their homes due to unaffordable property tax increases.

    Since the passing of this amendment, all properties in Michigan have two property tax values associated with them:

    1. State Equalized Value (SEV): supposedly equal to 50% of the market value of a property, not based on recent sales price.
    2. Taxable Value: the SEV annually capped as long as there is not a transfer of ownership.

    City Assessors are charged with determining how much property values have changed each year. Since they can't do each property individually, they use comparable sales to make broad generalizations to determine percent changes. Then these are applied to all properties in that area of the city.

    Property owners get an annual update on their SEV & Taxable Values with their city property tax bill, typically sent in December.

    So now, the city assessor tracks the SEV, but homeowners are taxed based upon the capped Taxable Value. These two numbers diverge over time as the SEV increases with property value, but the Taxable Value is capped. The Taxable Value is uncapped and equated to the SEV upon a sale or other transfer of property ownership, with limited exceptions.

    Homestead versus Non-Homestead Millage Rates

    Counties & cities in Michigan are allowed to set their own millage rates, with one restriction – a primary residence (Homestead) is exempt from up to 18 mills of school taxes on their Homestead property. A property qualifies as Homestead for this exemption if an eligible owner files a Principal Residence Exemption (PRE): https://www.michigan.gov/taxes/0,4676,7-238-43535_43539-210891--,00.html#:~:text=Section%20211.7cc%20and%20211.7,purposes%20up%20to%2018%20mills.

    Many investors have gotten an ugly surprise when they bought a property that was a primary residence of the seller for the last 20 years. The removal of the Taxable Value cap and the switch to Non-Homestead millage rates can double, even triple, the property taxes. By the way, the cutoff date is June 1 of each year for these changes.

    City & County Tax Bills

    Most Michigan properties receive TWO annual tax bills - one from the city and one from the county. Many banks handling tax escrow accounts for mortgages have mistakenly thought there was one tax due twice/year or totally missed one of the taxes.

    Investors should research the SEV and the Non-Homestead property tax millage rates to project what the property taxes will be after adjustment.

    You can use this tool to estimate future property taxes: https://treas-secure.state.mi.us/ptestimator/ptestimator.asp

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