Home-sale accelerant
Bill aims to spur housing market with an 18-month moratorium on state's pop-up tax
March 25, 2007
BY MARGARITA BAUZA
FREE PRESS BUSINESS WRITER
A proposed change in Michigan's pop-up tax would give home sellers like Anthony Rimanelli a much-needed boost in a sagging real estate market.
House Bill 4440-4441, which awaits state Senate consideration after being passed by the House 77-31 on March 14, would allow the buyer of a home to inherit the tax amount the seller currently pays, eliminating what is known as Michigan's pop-up tax.
Rimanelli pays $3,500 in taxes for his Grosse Pointe Woods bungalow. His tax bill increased an average of 4.7% annually from when he bought his house in 1997 for $127,000. His taxes that year were $2,370. The rate of increase is capped by the state's Proposal A, which limits annual increases in a home's taxable value to the rate of inflation or 5%, whichever is less.
If the proposed bill -- sponsored by Rep. Andy Meisner, D-Ferndale -- passes and is signed into law, the buyer of Rimanelli's home would be allowed to retain the current $3,500 tax bill, dodging the pop-up tax -- the name given to the adjusted tax amount a new homeowner pays when a just-purchased home is reassessed for taxes based on its full market value.
The law would be in place for 18 months and be retroactive to anyone who bought a home in Michigan on or after March 1.
"It's a phenomenal opportunity," said Rimanelli, who is selling his 1,100-square-foot home for $187,500. "Whoever buys this house is not going to get that pop-up tax hike."
Ripple effect
"Buyers would inherit the taxable value of whatever the current owner has," said Michael J. LeVan, a broker with Adlhoch & Associates in Grosse Pointe Park. "It wouldn't readjust. The law would jump-start the economy and get the real estate industry moving and selling again.
"So much of our economy is based on real estate. Think of what else people do when they buy a house -- they paint, they buy furniture."
Critics of the proposed law say it unfairly penalizes sellers who haven't owned their houses for a long time and are paying higher taxes due to the pop-up provision. Some House Republicans opposed the measure because it isn't permanent and could hurt builders of new homes, who would be put at a competitive price disadvantage.
"The plan picks winners and losers," LeVan said. "If you have two identical houses next to each other and one of those houses was purchased 10 or 15 years ago and the other house a year or two ago, these two houses have dramatically different tax bills.
"If you're a buyer and one house has got a $5,000 tax bill and the other has a $10,000 tax bill, the guy with the $10,000 tax bill is stuck. He'd have to reduce his price dramatically to compete with the guy next door with the smaller tax bill," LeVan said.
Supporters of the plan include Annette Keeble, a broker with Camelot Exquisite Homes in Bloomfield Hills and Rochester. She said the moratorium could give housing sales a badly needed boost.
"It's going to lessen the inventory that agencies have to carry," Keeble said. "It's going to motivate people to sell."
Bill Ballenger, editor and publisher of Inside Michigan Politics, said the bill has a good shot at passage.
"The Legislature is desperate to show it's doing something positive to help the economy and the sluggish housing market.
"It would cost money potentially to local units of government, but if houses don't sell that's not going to help local units of government either."
Rimanelli, who is looking to buy a home with his wife, Gina, when his current house sells, is looking for a home whose owner has lived in it for a long time.
"That's definitely a criteria," he said. "I don't want to get slammed by taxes."
Stalling starters
The proposed law doesn't do much for Kristina Pellegrini, who is carrying two mortgages as she tries to sell her starter home, which she bought six years ago.
"In my opinion, it's terrible," said Pellegrini, who is asking $249,000 for her Grosse Pointe Woods home, which currently sits vacant while she tries to sell it.
The house, which has a tax bill of $6,000 a year, has been on the market for 18 months.
"If you haven't lived in your house a long time, it puts you at a disadvantage," she said. "A lot of people buy starter homes and then move on to something bigger. I think this law would hurt a lot of people like that. There are a lot of houses in my exact same situation."
LeVan worries the law will add a burden to those who haven't been in their homes a long time, forcing them to lower their selling price to compensate for the expected higher tax bills.
He said he realizes the bill is just a temporary fix. Realtors are currently working with state Rep. Andy Dillon, D-Redford Township, on another proposal that would kick in after the 18-month pop-up tax moratorium expires.
That proposal would -- at the time of sale -- match the taxable value of a home to the average taxable value of similar homes in that community.
"It would bring people gradually towards the middle," LeVan said. "Some bills would go up, some would go down."
Bill aims to spur housing market with an 18-month moratorium on state's pop-up tax
March 25, 2007
BY MARGARITA BAUZA
FREE PRESS BUSINESS WRITER
A proposed change in Michigan's pop-up tax would give home sellers like Anthony Rimanelli a much-needed boost in a sagging real estate market.
House Bill 4440-4441, which awaits state Senate consideration after being passed by the House 77-31 on March 14, would allow the buyer of a home to inherit the tax amount the seller currently pays, eliminating what is known as Michigan's pop-up tax.
Rimanelli pays $3,500 in taxes for his Grosse Pointe Woods bungalow. His tax bill increased an average of 4.7% annually from when he bought his house in 1997 for $127,000. His taxes that year were $2,370. The rate of increase is capped by the state's Proposal A, which limits annual increases in a home's taxable value to the rate of inflation or 5%, whichever is less.
If the proposed bill -- sponsored by Rep. Andy Meisner, D-Ferndale -- passes and is signed into law, the buyer of Rimanelli's home would be allowed to retain the current $3,500 tax bill, dodging the pop-up tax -- the name given to the adjusted tax amount a new homeowner pays when a just-purchased home is reassessed for taxes based on its full market value.
The law would be in place for 18 months and be retroactive to anyone who bought a home in Michigan on or after March 1.
"It's a phenomenal opportunity," said Rimanelli, who is selling his 1,100-square-foot home for $187,500. "Whoever buys this house is not going to get that pop-up tax hike."
Ripple effect
"Buyers would inherit the taxable value of whatever the current owner has," said Michael J. LeVan, a broker with Adlhoch & Associates in Grosse Pointe Park. "It wouldn't readjust. The law would jump-start the economy and get the real estate industry moving and selling again.
"So much of our economy is based on real estate. Think of what else people do when they buy a house -- they paint, they buy furniture."
Critics of the proposed law say it unfairly penalizes sellers who haven't owned their houses for a long time and are paying higher taxes due to the pop-up provision. Some House Republicans opposed the measure because it isn't permanent and could hurt builders of new homes, who would be put at a competitive price disadvantage.
"The plan picks winners and losers," LeVan said. "If you have two identical houses next to each other and one of those houses was purchased 10 or 15 years ago and the other house a year or two ago, these two houses have dramatically different tax bills.
"If you're a buyer and one house has got a $5,000 tax bill and the other has a $10,000 tax bill, the guy with the $10,000 tax bill is stuck. He'd have to reduce his price dramatically to compete with the guy next door with the smaller tax bill," LeVan said.
Supporters of the plan include Annette Keeble, a broker with Camelot Exquisite Homes in Bloomfield Hills and Rochester. She said the moratorium could give housing sales a badly needed boost.
"It's going to lessen the inventory that agencies have to carry," Keeble said. "It's going to motivate people to sell."
Bill Ballenger, editor and publisher of Inside Michigan Politics, said the bill has a good shot at passage.
"The Legislature is desperate to show it's doing something positive to help the economy and the sluggish housing market.
"It would cost money potentially to local units of government, but if houses don't sell that's not going to help local units of government either."
Rimanelli, who is looking to buy a home with his wife, Gina, when his current house sells, is looking for a home whose owner has lived in it for a long time.
"That's definitely a criteria," he said. "I don't want to get slammed by taxes."
Stalling starters
The proposed law doesn't do much for Kristina Pellegrini, who is carrying two mortgages as she tries to sell her starter home, which she bought six years ago.
"In my opinion, it's terrible," said Pellegrini, who is asking $249,000 for her Grosse Pointe Woods home, which currently sits vacant while she tries to sell it.
The house, which has a tax bill of $6,000 a year, has been on the market for 18 months.
"If you haven't lived in your house a long time, it puts you at a disadvantage," she said. "A lot of people buy starter homes and then move on to something bigger. I think this law would hurt a lot of people like that. There are a lot of houses in my exact same situation."
LeVan worries the law will add a burden to those who haven't been in their homes a long time, forcing them to lower their selling price to compensate for the expected higher tax bills.
He said he realizes the bill is just a temporary fix. Realtors are currently working with state Rep. Andy Dillon, D-Redford Township, on another proposal that would kick in after the 18-month pop-up tax moratorium expires.
That proposal would -- at the time of sale -- match the taxable value of a home to the average taxable value of similar homes in that community.
"It would bring people gradually towards the middle," LeVan said. "Some bills would go up, some would go down."
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