The number of occupied homes considered "Likely Foreclosed" by the Wayne County Treasurer is falling much faster than the last “normal” tax foreclosure auction in 2019.
Alex, I'm sure you're aware of this problem, but I still have to ask about it: the PRE. Using the PRE to validate that a home is owner-occupied is not an accurate index: investors often don't file a PRE, because they want to pay the lower tax rate granted to owner-occupants. There's only a small financial penalty if the Detroit Assessor catches you, so it totally makes sense to ignore the requirement to file a PRE when you purchase a Detroit property. It's easy to get away with, saves the investor lots of money, and distorts the data. What do you think?
I actually think the issue is in the other direction -- that there are more homes that should have PREs, but don’t.
The City has gotten much better at rescinding PREs on properties that shouldn’t have them, but I also think that has caught up, for example, a lot of family homes in the process. The owner dies, passes the home on to a next generation, but those new owners don’t file a PRE, PTA, or both and the PRE is stripped.
It’s very common to find these situations when helping people apply for HOPE property tax exemptions, which is why you pretty universally also fill out a PRE at the time of application for the HOPE exemption -- just in case they should have a PRE, but don’t.
But one good thing about the HOPE exemption being a major avenue out of tax foreclosure risk (and by far the best one) is that you can catch these PRE issues in the process.
I’m familiar with the landlords trying to dodge taxes dynamic as well, of course, but largely the way they’ve done that in the past is just to not pay at all. Extract rent. Pay no taxes. Let the property go back to auction. But I think that’s changing now. Home prices are soaring. These rental properties are no longer just a means to an end (extracting rent) they have much more value in and of themselves that a landlord is likely going to want to protect and not lose to a tax auction.
Alex, I'm sure you're aware of this problem, but I still have to ask about it: the PRE. Using the PRE to validate that a home is owner-occupied is not an accurate index: investors often don't file a PRE, because they want to pay the lower tax rate granted to owner-occupants. There's only a small financial penalty if the Detroit Assessor catches you, so it totally makes sense to ignore the requirement to file a PRE when you purchase a Detroit property. It's easy to get away with, saves the investor lots of money, and distorts the data. What do you think?
Hi Pam, good question.
I actually think the issue is in the other direction -- that there are more homes that should have PREs, but don’t.
The City has gotten much better at rescinding PREs on properties that shouldn’t have them, but I also think that has caught up, for example, a lot of family homes in the process. The owner dies, passes the home on to a next generation, but those new owners don’t file a PRE, PTA, or both and the PRE is stripped.
It’s very common to find these situations when helping people apply for HOPE property tax exemptions, which is why you pretty universally also fill out a PRE at the time of application for the HOPE exemption -- just in case they should have a PRE, but don’t.
But one good thing about the HOPE exemption being a major avenue out of tax foreclosure risk (and by far the best one) is that you can catch these PRE issues in the process.
I’m familiar with the landlords trying to dodge taxes dynamic as well, of course, but largely the way they’ve done that in the past is just to not pay at all. Extract rent. Pay no taxes. Let the property go back to auction. But I think that’s changing now. Home prices are soaring. These rental properties are no longer just a means to an end (extracting rent) they have much more value in and of themselves that a landlord is likely going to want to protect and not lose to a tax auction.