[Cadians]

Hi everyone. This is my first thread and I'm hoping to get some different perspectives on my situation.

I own a 1,548 SF two-story house that was constructed in 1929. The previous owners razed the existing two-car garage and constructed a new one in 2007, as well as an attached finished workout room behind the garage. This "accessory unit" is 440 SF and has a small kitchenette (microwave and sink with some cupboard space), a 3-fixture bathroom, a small closet and a small utility room where the electric water heater and sump pump access is located. The unit also features electric baseboard heat controlled by a thermostat. Other features include drywall, recessed lighting, and laminate wood flooring. The windows are not large enough to be considered egress windows. The only access to this accessory unit is through a door located on the back wall of the garage, meaning there is no access into the unit from an exterior wall.

I recently appealed my taxes with my local county assessor (a board of review gave me 10 minutes to go through my 15 page report). They lowered my taxes slightly (because I proved a substantial increase year-over-year relative to the rest of my neighborhood), but they continue to tax me on the accessory unit square footage. Using the SEVs of my neighbors and other comparable houses, I supported an average SEV $50 SF. Before I disputed, mine was $55/SF if you count the 1,548 SF from my actual house and the 440 SF from the accessory unit.

I believe they were correct in continuing to tax me on the accessory unit square footage because it was constructed with all of the proper permits and is wired for heating, but they simply took my $50/SF average and multiplied it by my total GLA (1,548 + 440). Because the accessory unit does not feature the same amenities as my actual house (for example, it does not have any form of air conditioning, but my house has central air), I do not think I should be taxed the same amount (on a per square foot basis) for the accessory unit square footage. Additionally, you have to go through a cold space (the garage) in order to access the accessory unit.

I'm being taxed approximately $1,200/year extra because of the 440 SF accessory unit (that's after my successful appeal). I had the following idea on how to reduce my tax burden:

If I have an electrician come out and remove the baseboard heat so that the unit no longer has permanent heating fixtures, will this prevent the county from being able to tax me on this space? Based on my understanding, by definition, the area would no longer be considered GLA because it would no longer have heat.

To prevent pipes from freezing during the winter, I would just run a space heater and set it to 50 degrees. I believe this would be more efficient than the existing baseboard heaters from 2007.

I look forward to any feedback!

[zthatzmanz28]

Is the room dry walled? My BnL had space upstairs in his 3,000 sq ft house he built and the county said since t wasn't drywalled, it could not be counted as living space and was considered attic storage...not sure if that is true for all municipalities. Or if a ground level room will meet the same storage criteria?

Then again, if the city where you live has a tax rate that charges $1200 a year for a 440 sq ft space, I would seriously consider moving to a place that has a lower millage rate.

[Cadians]

Thanks for the reply Yes, the 440 SF space is dry walled. My city does levy fairly high taxes... Mine are $5,250 in 2015 for a total of 1,988 SF (including the 440 SF accessory unit) and my house isn't really that nice. It would be considered a starter home and I bought it in As-Is condition after it had been rented for 3 years and I'm currently fixing it up. I purchased the house for $123,600 (seemingly under market but it did and still does need a lot of sweat equity) in June 2014 and the county estimates the True Cash Value of my house at $198,800 (SEV of $99,400). Millage rates for 2015 are 52.89. Believe me, I thought the taxes would go down after I purchased the house, but housing values are rising my neighborhood. I've considered selling and moving, but I feel that the high taxes are going to make the house harder to sell because given that it falls into the starter house category (3 beds, 1.5 bath), the $400+ per month in taxes are either going to scare people off, or could bust potential buyer's financing due to DTI constraints. I need to find a way to get the property taxes lowered.

[zthatzmanz28]

Originally Posted by Cadians

Thanks for the reply Yes, the 440 SF space is dry walled. My city does levy fairly high taxes... Mine are $5,250 in 2015 for a total of 1,988 SF (including the 440 SF accessory unit) and my house isn't really that nice. It would be considered a starter home and I bought it in As-Is condition after it had been rented for 3 years and I'm currently fixing it up. I purchased the house for $123,600 (seemingly under market but it did and still does need a lot of sweat equity) in June 2014 and the county estimates the True Cash Value of my house at $198,800 (SEV of $99,400). Millage rates for 2015 are 52.89. Believe me, I thought the taxes would go down after I purchased the house, but housing values are rising my neighborhood. I've considered selling and moving, but I feel that the high taxes are going to make the house harder to sell because given that it falls into the starter house category (3 beds, 1.5 bath), the $400+ per month in taxes are either going to scare people off, or could bust potential buyer's financing due to DTI constraints. I need to find a way to get the property taxes lowered.

$52.89? That's just slightly higher than Detroit's millage! And in most places $198K is not all that outrageous today..

That's one reason why my wife and I rent, what we save in property taxes pays for a nice two week vacation.

Good luck with that reconfigurement of the space, more than likely it will not drop much as cities need every dime they can squeeze from us.

[jackmichigan]

Originally Posted by Cadians

Thanks for the reply Yes, the 440 SF space is dry walled. My city does levy fairly high taxes... Mine are $5,250 in 2015 for a total of 1,988 SF (including the 440 SF accessory unit) and my house isn't really that nice. It would be considered a starter home and I bought it in As-Is condition after it had been rented for 3 years and I'm currently fixing it up. I purchased the house for $123,600 (seemingly under market but it did and still does need a lot of sweat equity) in June 2014 and the county estimates the True Cash Value of my house at $198,800 (SEV of $99,400). Millage rates for 2015 are 52.89. Believe me, I thought the taxes would go down after I purchased the house, but housing values are rising my neighborhood. I've considered selling and moving, but I feel that the high taxes are going to make the house harder to sell because given that it falls into the starter house category (3 beds, 1.5 bath), the $400+ per month in taxes are either going to scare people off, or could bust potential buyer's financing due to DTI constraints. I need to find a way to get the property taxes lowered.

When you purchased the house, was an appraisal done--perhaps for a loan? If so, an independent appraisal would be your strongest evidence to present on appeal. If on wasn't done, if you're going to appeal to the Michigan Tax Tribunal, you may want to order an appraisal prior to making improvements to the property. Generally, you're limited to presenting evidence to the state that has been presented to the local Board, but you may be able to sneak it in. You should also detail the many repairs that need to be done to the house in order to bring it up to standards (photos help!). Show how your house is not up to par with others in the neighborhood. As long as you purchased the house in an arms-length transaction, even though you can still buy a place below-market, the purchase price should at least be somewhat reflective of the market value. Also, detail the length of time it was on the market, how it was marketed (listed by a brokerage?) and show that there were no known circumstances that forced a sale on the part of the Seller. I wouldn't go tearing out certain features of the house--that may not even help anyway.

Local assessment practices vary across the state and some are pretty poorly done. Local assessors often simply keep the assessments high knowing that few people will appeal their assessments to the state. The state does a poor job of overseeing local assessors and they do not seem to penalize them for substandard assessment practices. As a worst-case example, the City of Detroit's assessments border on the ridiculous; others aren't far behind.