"Cherry Picking" Sales, Distorts the Sales Ratio Study ...by Gerald Frendt

STATE EQUALIZED VALUES ARE INCREASING IN PORT HURON!!

In the midst of the worst real estate recession in many decades, it is reported that SEV values in Port Huron increased by 2.54%, in 2007. To Realtors who are witness to sales prices not seen in twenty years; and to sellers who are bringing thousands of dollars to closings to avoid a destroyed credit rating; and to mortgage companies who are forgiving thousands of dollars owed on the mortgage to avoid taking back another home; and to the families that had to leave their homes because no one would offer what they owed on it, this is simply unbelievable.

The Assessor’s office in Port Huron, was instructed by the County Equalization Department to assess the properties in Port Huron in a manner to reflect the 2.54% increase. The State of Michigan mandates by law that property values be assessed at 50% of market value. Careful review of real estate transactions is an ongoing process by the local municipalities, repeated by the county equalization departments, and finally by the state equalization department to insure accuracy and fairness in determining the true market value to be used for taxation.

How can the opinions of value be so different? The late Senator Daniel Moynihan of New York was fond of saying “everyone has the right to their own opinion, but they do not have the right to their own facts”, - he was wrong. The State Tax Commission in Bulletin #6, issued last August 15th, instructed the County Equalization Directors and local assessors to follow a method that would eliminate many market facts. The result of that bulletin was to ignore market facts and in the process “skewer” resulting market studies to be higher. Foreclosure sales (property lost to the bank), have never been used in market studies, but prior to this year, the Assessors Training Manual clearly identified the subsequent sales of bank owned properties to the public, as being acceptable sales. Now the assessors are instructed to eliminate those sales if they don’t pass five general tests and ten more tests that are specific to foreclosed properties. Very few sales, of any type, would pass these tests. This “Cherry Picking” of sales causes the deck to be stacked!

Most Realtors will tell you that the market is currently dominated by the sale of foreclosed properties. Freddie Mac, Fannie Mae, HUD, banks and mortgage companies are loaded with foreclosed inventory and with more homes going into foreclosure they are aggressively pricing their properties to sell. Many are selling at half of what the local assessor reported for value. Sellers, trying to compete, are sitting on the sidelines, not able to lower prices as drastically, and many will end up losing their homes to foreclosure. To tell these sellers that bank sales are not affecting property values is insulting. The process of valuation must reflect the real world or lose credibility. Trust in government is at stake.

Many property owners who received their new assessments in the first week of March, made an appointment with the Tax Review Board, which met in the second week of March. Many expressed disappointment with that procedure. They heard about Proposal A, State Equalized Value, Capped Value, Taxable Value, the inflation rate, economic districts and studies and mandates by the County, etc, etc, and they came away with the feeling that they had been given a bureaucratic shuffle. They deserve better than that.

Why would the Tax Commission do this? I can’t prove motive, but it is clear that tax revenues would decline drastically at every level, if those sales were allowed in the study. With the State searching for additional revenue, I suspect it would begrudgingly give up scheduled revenue. If I am correct, then the State Tax Commission, by issuing Bulletin #6, has raised taxes without the approval of the people. It is a violation of the Headlee Amendment, but more importantly, it is a violation of the people’s trust in government.