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Old 01-30-2013, 01:09 PM
 
Location: Home!
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Has anyone heard of this? I received a card from an atty office saying that I may be owed a Tax Rebate from the sale of my home. I contacted them and they will send out info regarding it. If I qualify for this, they get 30% of the amount, if not, then they absorb any costs. This has to do with the SEV being less than the sale or something to that effect.

I am just wondering if anyone here is familiar with such a rebate.

Home was in Michigan.
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Old 01-31-2013, 02:46 PM
 
Location: Berkeley Neighborhood, Denver, CO USA
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Default we need more info

smells somewhat scammy to me
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Old 01-31-2013, 02:53 PM
 
Location: Boise, ID
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Did you sell short? I'm guessing they are targeting people who qualify to write off the short, but don't know how.

For example, if you sold at $100k short, and could write that amount off, but didn't know about it, then for 20 minutes worth of work, you would "get" to pay them $30k x your tax rate. So if you were in the 25th percentile, you would owe them $7500 for their 20 minutes worth of work that you could do yourself, or have an accountant do for you.
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Old 01-31-2013, 02:59 PM
 
Location: Home!
9,376 posts, read 11,924,888 times
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I did sell short. He said it is if you sold for less than your SEV. I doubt I did, though, so it might all be a moot point. Just thought it might be a bit scammy.

Not sure about the writing off the short. So, you might have something there. I will have to look into it. I wonder if that is an option on TurboTax?
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Old 01-31-2013, 05:11 PM
 
Location: Boise, ID
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Sorry, despite working in a real estate office for 11 years, SEV is not a term I am familiar with. No idea what it stands for. Sold estimated value, maybe?

No idea what options Turbotax has set up for a short sale, but the writeoff has been around for a few years now. Basically, if you still had your original mortgage from when you bought the house, or if you refinanced without taking cash out, or if you took cash out to use for remodeling the home (but not for other purposes, like college), then if you had to sell for less than that amount, you may qualify to not pay taxes on the short. The program was supposed to expire last month, but I heard it got extended through this year.

From what I understand, though, you can't do much about it until and unless your bank sends you a 1099-C (cancellation of debt). Consult your accountant to be sure, and if you don't have one, talk to your real estate attorney.
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Old 01-31-2013, 08:55 PM
 
Location: Home!
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Sorry, I guess I figured everyone has to deal with SEV for their taxes. It is the State Equalized Value that we get (in MI, anyway) once a year. Basically, it is supposed to be the value the State assesses on your home. I don't think it is ever very close to the reality and you can contest it as it affects your taxes.

I did have the original mtg, never refinanced it. The bank waived the deficiency, I don't know if that matters. I will check Turbo tomorrow.

Thanks for the insight!
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Old 02-01-2013, 09:22 AM
 
Location: Boise, ID
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Quote:
Originally Posted by kimba01 View Post
Sorry, I guess I figured everyone has to deal with SEV for their taxes. It is the State Equalized Value that we get (in MI, anyway) once a year. Basically, it is supposed to be the value the State assesses on your home. I don't think it is ever very close to the reality and you can contest it as it affects your taxes.

I did have the original mtg, never refinanced it. The bank waived the deficiency, I don't know if that matters. I will check Turbo tomorrow.

Thanks for the insight!
Ah, in my area, that is just called "Assessed value". Since it has nothing really to do with actual value, I can't imagine any rebate you could get based on how your actual sales price compared to it.


If you had the original mortgage, and the bank waived the defiicency, how it would normally work is that the bank would (and is actually legally required to, although most are not currently doing it) send you a 1099C, and you would have to pick up the written off portion as though it were income for the year.

So (just to pick some numbers) if you made $80k at your job in 2012, and the bank waived a $100k deficiency, you would have to pay 2012 taxes as if you actually made $180k for the year. Ouch! I would consider at least consulting a tax accountant or tax attorney to file this year, instead of just Turbotax, just to make sure it is all done correctly.

The reason I say this is that I don't know how it would work if the bank were to send you the 1099C say 2 years from now, and the Tax law that currently lets you out of paying those taxes were to have expired (as it was supposed to do last month before being extended). Since you are talking potentially thousands of dollars in taxes, it would be worth spending a hundred talking to a professional about it.
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Old 02-02-2013, 12:15 AM
 
8,563 posts, read 12,342,073 times
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No one from outside of Michigan is going to have a clue about what this might be, and the posts to date show that to be the case. But...I'm pretty sure that I know what the attorneys are trying to do:

The "rebate" they're talking about is a possible refund of the Transfer Tax which was paid when you sold your primary residence (no other real estate qualifies). Relatively recent changes in Michigan law exempt homeowners from paying Transfer Taxes when the State Equalized Value (SEV) at the time of sale is equal to or less than the SEV at the time of purchase or acquisition. The purpose of this change was so that homeowners might escape paying the transfer tax when they were (apparently) selling the home at a loss.

The problem with the law, however, is that the legislators and state attorneys who wrote it didn't really have an understanding of the relationship between SEVs and sale prices--they do not necessarily correspond (even though the SEV is supposed to be 1/2 of true cash value in Michigan).

So...even though you may have sold at a loss, you may not qualify for the Transfer Tax exemption if the SEV did not go down during the time when you owned the property.

Since you now know what the attorneys are going for, you can just as easily find out that information for yourself. Dig up the date when you purchased your home and see if you can find a tax bill from that time which shows the State Equalized Value for that particular year. If you can't find that information, you will need to contact the local Assessor--they should have old SEVs for your former home on file.

Next, find out what the SEV was at the time of sale. If it is lower (or equal to), then you should be able to file for a refund on your own and keep the entire amount (provided it was your principal residence). I haven't dealt with any refunds, so there may be a time limitation. In any case, you can just as easily file for a refund as some third party. Check with the local Assessor for a possible form to fill out.
------------------------------------------------------------------------------

FURTHER INFO FYI:
The particular state law citation, if you're curious or if the Assessor needs it, is (Michigan Compiled Laws) MCL 207.526 Sec. 6 (u). Section 6 lists the various ways that some Sellers may be exempt from transfer tax. Below is the full text of the relevant clause. ("section 7cc" refers to the homestead exemption for the 18-mil state school tax)

(These are exempt from transfer tax: )

(u) A written instrument conveying an interest in property for which an exemption is claimed under section 7cc of the general property tax act, 1893 PA 206, MCL 211.7cc, if the state equalized valuation of that property is equal to or lesser than the state equalized valuation on the date of purchase or on the date of acquisition by the seller or transferor for that same interest in property. If after an exemption is claimed under this subsection, the sale or transfer of property is found by the treasurer to be at a value other than the true cash value, then a penalty equal to 20% of the tax shall be assessed in addition to the tax due under this act to the seller or transferor.

Note: The last sentence really shows that this was poorly written or maybe just mistakenly written. I had read that this law was supposed to be for when people sold at a loss, but the only mention is of the SEV--which does not necessarily correspond to purchase or sale prices. But that's all the law mentions: SEVs. I think they MEANT to write the law so that you both had to sell at a loss, and the SEV also had to be less. But that's not how it's written. Good luck.

EDIT: Of course, this has nothing to do with Mortgages and this is in the Mortgage forum.

Last edited by jackmichigan; 02-02-2013 at 12:42 AM..
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Old 02-02-2013, 01:08 PM
 
Location: Home!
9,376 posts, read 11,924,888 times
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Thank you, jackmichigan, for the info. I actually was going to post it in the MI forum, but I wasn't sure it was just MI and I wasn't sure if there were many Realtors or those who would know. I should have posted it there. As far as putting in the Mortgage forum, I figured someone might have dealt with this in their sale.

Thank you for all the information!
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Old 02-02-2013, 04:29 PM
 
8,563 posts, read 12,342,073 times
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Quote:
Originally Posted by kimba01 View Post
Thank you for all the information!
You're welcome. Just don't get your hopes up too much--a lot of Assessors didn't reduce SEV values as quickly as they should have. But there's a chance you're due a refund, so I'll keep my fingers crossed for you.

By the way, I also sent you a direct message. Good luck.
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