In Michigan and many other states the sale of a property
provides an opportunity for the tax man to
get in on the action with what is
called a Transfer Tax. The tax is levied on most sales and is split between the
state and the counties. It is made up of two deceptively named components – the
State Revenue Stamp and the State Tax Stamp. It’s sort of like a sales tax on the
transaction and in Michigan amounts to a total of $8.60 per $1,000 of value of
the sale. In Michigan it is customary that the Transfer Taxes are paid by the seller
of the property; however, if the property is bank owned the banks lately have
been requiring the buyer to pay those taxes.
There are also exceptions in the law that established these
taxes (when are there ever not exceptions?), one of which was recently “clarified”
by Michigan lawmakers. Exemption “U” provides that the seller is exempt from
the Transfer Taxes if the SEV value of the property at the time of the sale is
lower than the SEV value when the seller bought the property, i.e. it is still
underwater, with negative equity, from the recent Great Recession.
While many areas in Michigan have recovered nicely the value
that was lost in the Great Recession, not all area have shared equally in the
comeback. Many properties (mostly residential
homes) that were purchased at the peak of the “real estate bubble” that led to
the Great Recession are still way below those values. In most cases the SEV
values of those homes rose along with the bubble prices (although not as fast
due to restrictions on how fast SEV’s could be raised by local assessors) and
reached heights that are well above where we are today. Many severely depressed
areas, like Detroit and some surrounding, older suburbs saw value drops
exceeding 50% during the Great Recession, after having seen run-ups in value
that just didn’t make sense in retrospect.
So, now people who bought during the peak years are trying to
sell and are usually taking a loss. In addition, the SEV values were brought
down relatively rapidly to reflect the market values losses of
the recession.
Most of those people now qualify for the Exception “U” relief from paying
Transfer Taxes on the sale of their homes. Many who sold within the last 4
years and actually paid those taxes may also be due a refund of the taxes that
they paid. The recent Legislative action clarified when and how properties
qualified for the exemption from those taxes under Exception “U”. There is a good article explaining how you can
determine if you are eligible for a refund of those taxes at the Alger Law
Office web site –
If you seem to be eligible, you can download the form to
request the refund here –
So, the bottom line is that you may still take a loss on a
property that was just way overpriced during the heat of the real estate bubble;
but, you don’t have to add insult to injury by being taxed by the state on that
transaction. And if you did sell within the last four years, you may be able to
get a refund. So “U” can help you.
I hope this post helped you, too.
No comments:
Post a Comment