The Top 10 Reasons

Archives for August 2008

The Top 10 Reasons Macomb County Michigan Is Being Hit With A 25% Increase In Property Taxes

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1. What is really crazy is that this article was posted on the Detroit News website today while I wrote an article about a new way to collect property taxes yesterday. In this article it states that the County Commissioner of Macomb County is suggesting to raise property taxes by almost 25% to make up for a ever growing defecit.

2. They are expecting to have budget defecits of almost $33 million in 2009 and $43 million in 2010. Really? The county that has a city that was rated one of the best places to raise a family (Sterling Heights) in the country year after year is that far in debt? How can this be so?

3. Of course the governments only plan of action is to raise property taxes to make up for the loss in revenue. It blows my mind why we even vote for anybody because it always seems like things get worse not better, regardless of what level of the government it is.

4. If the Macomb County Commissioners raise property taxes the full amount that they can it would bring in an extra $11 million dollars in revenue for the county still some $22 million dollars short of being able to cover next years defecit.

5. Sure, for a home that’s worth $200k that is only an extra $100 a year which is about $9 more a month. Not a big deal and for most people that still own their homes its probably something that can be done. Too bad many people are having to borrow from their home equity loans just to be able to stay current on their taxes. Good thing that people can still write off their property taxes on their income taxes.

6. The Commissioner from Eastpointe said that the county is in dire need of help because they do not want to lay people off and have to shut down programs. Some of these cuts include selling properties like the Martha T. Berry Medical Facility in Mount Clemens. About 430 county workers would be laid off. For the people that have retired with the county they would have to look at possibly freezing or making drastic changes to its pension and benefits programs. They would also charge property owners in the county’s northern communities like Romeo for instance to pay for the Sheriff to patrol those areas which are not being paid for now.

7. The main reasons why Macomb county is getting hit right now is due to decreased property values which results in the County assessor having to lower property values which lowers property taxes. With so many homes going into foreclosure they are losing a lot of revenue from those property taxes. Costs for their retirees from pensions and health benefits to the cost of inmate care at the prisons are all rising too. With so many vacant properties sitting around in the county because of people defaulting on their 30 year mortgages its easy to see why this is going down.

8. I know that a lot of this could have been prevented. How did this defecit get so big so fast? It went $2.7 million to $12 million in 3 years. I understand that gas prices, food prices, health care prices, and others have gone up, but almost $10 million in 3 years? That is ridiculous. Its easy to point the finger at the people in control because it comes back to poor planning. Isn’t that all that the government knows how to do in the first place? We can assume that they did not think that their citizens biggest employers of Ford, GM, and Chrysler would have tanked so fast resulting in job losses and lost tax revenue but they should of.

9. But who really cares about this defecit anyways? We are operating in the hole to begin with so whats the difference if we are $10 million or $100 million in debt. The US Government is trillions of dollars in debt and things are still moving (in the wrong direction). Why not just keep spending and keep people employed?

10. I guess I just don’t get how hard it is for anybody to run a government. I thinks its so simple. If I was the finance director for the county I would have said something like “we only have $1 million dollars in the check book which will last us 5 weeks. At that time if we do not get any more revenues we will have to shut down the government and its services until next year when property taxes are due. Since I AM A CITIZEN of this county I do not want to see my property taxes going up because I want to know what happened to the other $3500 I gave to the county (which I did not get a break down of where every dollar I gave them was spent).” Its so easy to raise taxes and say it will take care of everything but I have not seen one piece of evidence ever that supports higher taxes fixed anything. Raising taxes solves nothing. Hopefully you read my idea about using how much land you own as a way to collect taxes versus real estate values. The land issue would include businesses too. That’s right, Ford, Chrysler, and General Dynamics. Your large facilities are taking up large amounts of property and should be taxed accordingly.

The Top 10 Reasons Why Property Taxes Are Not Calculated Correctly And Need To Change

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1. Right now around the country your home is taxed based on a percentage of what the value or home is worth based on what the county assessor thinks it is worth. As an example lets say your local county government has a property tax of 1% and your home was assessed at $300k. You would pay $300k x 1%= $3000 a year in property taxes.

2. This is a great system for the county when property values are going up because as your property value goes up the amount of money you pay in property taxes goes up. The county government does not look bad at all because they did not have to raise the percent to bring in more money, it was the market that did it.

3. For the most part people do not complain about paying a little more in property taxes because they have been told that the value of the property has gone up. Everybody likes hearing this news. Even to hear that it went up 10% in value in one year is pretty amazing. Using our $300k example would result in a new value of $330k and new property taxes of $3300. Not bad knowing that you could sell the house for $30k more and only had to shell out $300 more a year in taxes. Hopefully you played it safe and took out a 30 year fixed mortgage and are not worrying about a adjustable rate mortgage payment going up.

4. Never had property values gone up so fast as when they did during the refi boom of 2002-2006. Homes prices around the country went up anywhere from 30%-200%. This was just ridiculous. In a lot of cases new cities were created because of all of the home building going on. This resulted in a lot of new revenue for these cities to bring in to fund their police and fire departments. Let alone the Parks & Recreation, new government and school buildings and more spending.

5. This system seemed to be good for everybody because with the rising cost of real estate most people still felt ahead. What was really happening in the background was a real let down. Cities saw all of this new revenue coming in and decided to start investing in new buildings and spending on frivolous things just because they had the money.

6. Fast foward to the present and now home prices are dropping around 12% every quarter. This is erasing any or all of the gains each home owner has had in the appreciation of their real estate investments. Never mind the people that bought their home in the past two years because unless they put a large down payment on their home they are probably upside down on their mortgage. There has also been the matter of all of these homes going into foreclosure. With the homes being foreclosed upon the county government is losing out on the revenue it gets from the property taxes it collected. Now the county is in a real bind because they assumed that property values were going to keep on rising just like they were doing over the recorded history of real estate prices. Since they were spending all of the extra surplus money they received to go out and buy stuff many county governments are now in debt and have no way to pay it back unless they make major changes. These major changes are doing things like laying off teachers, firefighters, police officers, county assessors (bad karma), road repair workers, etc.  

7. Now all of these home owners that were not complaining about paying a little more in taxes because of the previous values of their homes are trying to fight the county and city governments because the county assessor is not lowering what they think your property is worth. Even though you can go up and down your street and see homes selling for far more less than what you were assessed at. What a city assessor and an appraiser look at are similar and different in a number of ways. The appraiser is getting paid either way. The county assessor needs the property tax revenue to stay the same so he can still have his job.

8. Now the county needs to raise more revenue than what it was bringing in during the refi boom to make up for all of the homes in foreclosure and rising prices on things like gasoline to fuel all of the government vehicles, pay salaries, utility bills, etc. Would you believe that some counties are trying to raise property taxes on your declining property value? There argument is that you do want Police and Fire Departments, right? You do want a school around the corner for your kids, right? You want your kids to get picked up by a bus so you do not have to be late driving your kid to school, right? Looks like there is nothing you can do but play by the rules that do nothing but stick it to you. Many people were stuck in the whole taking cash out of the equity of the inflated value of their home to pay thinks and this included their property taxes and home owners insurance. Some sought out a home equity line of credit to help pay the increases in their tax bill.

9. Think about this for a second. How about instead of charging people what their homes are being assessed at, the county charges them by how much land you own? How many times have you seen homes that share a similar lay out and plot of land but one home owner really takes care of their home and wants to remodel their home with the newest kitchen cabinets, granite counter tops, etc? In the counties eyes the house that is better taken care of should pay more than the house that does not have all of the extras. But isn’t that really a shame. The people that do not put extra money in their house for new appliances or a new kitchen or bathroom should not be penalized. Its probably somebodys grandparents that have lived a certain way for the past 45 years and have not upgraded anything in the past 20 years. Their reason for it is if it ain’t broken don’t fix it. The house is probably clean and spotless, but just old in style. But they both own the same land. Do not penalize the people that upgrade and make them pay more just because. They should be getting the money they put into it when they sell the house for more than grandma and grandpa next door.

10. What needs to be done is the county governments around the country need to change the way they tax their residents. How it should be done is if you own a two acre parcel of land and your neighbor owns a one acre parcel than the person with two acres should pay twice as much. What needs to be done is the county government needs to actually follow a budget and say this is the amount of money we will need to provide the services we need. Each property owner will pay their property taxes based on how much land they own. Take the amount needed for the budget to be taken care of and divide it by the amount of acres the city owns. Then start breaking it down by .25 acre, .5 acre, 1 acre lots, and so on and so on. This way the value of the home is no longer a determination for the city to make. By doing this all county assessors would be let go of course, but this would free up one county job and save the tax payers money. I’m sure there are more jobs related to the assessor position but this is just a start. This will eliminate property owners having to go to a tax tribunal to argue that they should not be paying as much property taxes on their house because of the lowering values. I watched my dad had to go before the City of Eastpointe (in Michigan) Tax Tribunal to argue such a point on a couple rental properties he owns. He was able to get the taxes lowered by at least $100 on two of the three properties and none for the other. Eventhough the proeprty values declined in value over $7500 each on homes that are probably worth around $105k. That is around a 7% drop in one year. If the city would just base the taxes on what they need to make the budget work based on the percent of land you own in the city they would save themselves a lot of time and effort to do other things like I don’t know, find ways to lower taxes.

The Top 10 Reasons You Better Buy A House With Your FHA Loan By October 2008

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1. If you are thinking about buying a home soon you better be putting offers in very fast. On October 1, 2008 there will be new guidelines coming in to play that are administered by the Housing and Economic Recovery Act of 2008. This new housing bill is going to put a major squeeze on people looking to buy a home after that date so you better get a move on. 

2. Under the new guidelines set forth by the FHA the minimum amount down payment will go up to 3.5%. It is currently at 3%. Not so much of a big deal but it does account for more money that you will have to come up with. On a $100k mortgage that is another $500 plus your closing costs.

3. FHA loan limits will decrease which will mean fewer people will be able to get approved on a jumbo loan. The current maximum loan limit is set at $729,750. This went into affect March 6, 2008. The FHA did this so they could help out people with bad loans that were in high cost areas. Hopefully you heard about this and have tried to refinance your mortgage over the past 5 months if you fall into that category. Now the FHA is taking a percentage of what the highest and lowest price sales of homes are for a particular area and using that number to determine what the max limits will be. This goes for people looking to buy a home or refinance with a FHA loan.

4. You can still receive a tax credit up to $7500 for a first time home buyer. This is to help you with things like closing costs when purchasing the home. It is not free money though. If you take the credit you will have to pay it back over the next 15 years or when you plan on selling the home. It is a no interest loan so it makes sense to use it, jsut remember its not free.

5. My favorite one is the Down Payment Assistance programs will be eliminated. You might be asking yourself what is Down Payment Assistance? Could it be another term for getting money from your parents or the company you work for? Nope. How it works is that if you want to buy a home you have to negotiate with the sellers for them to lower the price on the home first. If agreed, you would call up a mortgage company, get approved on the FHA loan, then send your application to another company that gives you the money for the sale of the home. Weird huh? This means another company is giving you the down payment, and at closing they are getting paid back the money from the proceeds of the sale. You wonder where they make any money because at the same time they are technically giving you money and receiving it back. More than likely they are getting a percentage of the revenue or a referral fee from the mortgage company the loan originated with. If I did not know how this worked I would think it would be some kind of scam. Seems like the FHA wants to put the kibosh on it too.

6. With the Down Payment Assistance programs being terminated it means that people looking to buy homes will actually have to (if you can believe this) save up money for a down payment and their closing costs. They can still negotiate with the sellers for “sellers concessions” if they want to which is okay. I do not get why people negotiate seller concessions to begin with. Its not like they are giving you money. The home buyer is just rolling the costs into the loan with the lowering of the price of the house which means you have financed your closing costs.

7. With this going into effect in a couple months the people that need the Down Payment Assistance Programs better be hoping they can get a house. The remaining Down Payment Assistance companies out there require you to have a 620 credit score or higher. No ifs, ands, or buts about it. You will probably see a lot of these companies going out of business or having to try another way to lend money.

8. This is actually good news for the people sitting around wondering if now is the time to buy a house. This gives more reason to wait until 2010 to buy a home. When the mortgage companies stopped doing 80/20 loans, second mortgages, and home equity loans it forced a lot of companies to do one normal conventional loan like a 30 year fixed rate mortgage. Things are going to start getting back to where they were before the housing boom because of this.

9. With no more 100% financing around it means that you will have to have money to get approved on a loan. With no down payment assistance this removes all of the buyers out there that are going to use it. Right now some of the big mortgage companies like Quicken Loans, Chase, Countrywide, and Bank Of America are using these programs to close loans. The FHA loan is a large portion of these companies business and once the guidelines are tightened you will probably see more people lose their jobs because there is not enough revenue coming in. They will still be able to refinance homes but the FHA is not allowing help anymore. I say good for them.

10. This is the last straw for mortgage companies and want to be home owners to get some sort of 100% financing when buying a home. When all of the options are removed there is going to be a time period of less people buying houses. Most people in this economy can afford a monthly payment but do not have the money for any kind of a down payment. With no people buying homes it is going to lower home prices even more. Its simple supply and demand. This will probably cause mortgage rates to go up a little more because now the banks need more revenue to make up for the lower amounts of homes being bought. All in all this really is a step in the right direction for the American population because now we are being held accountable for our financial actions. If you must buy a home and need the FHA loan to do it, you better be putting offers in and hope they close by October 1, 2008 or you will have to have 3.5% down payment coming out of your pocket.