Temporary Reprieve From Tax Auction Doesn’t Solve Underlying Problem

As I wrote about last October, Detroit was facing a tax foreclosure epidemic this fall with nearly 62,000 properties heading to tax foreclosure due mostly to deadbeat or absentee landlords not paying property taxes. These landlords would have forced nearly 100,000 people into homelessness.

It appears a crisis has been diverted by the Wayne County Treasurer’s office. Curbed Detroit is reporting:

“Fortunately, the forecast doesn’t look so grim anymore. Loveland Technologies reported yesterday that 35,064 properties have since been rescued from the swirling toilet bowl o’ foreclosure, many of them doing so byentering payment plans with the county. At the same time, 26,818 Detroit properties are still riding the Foreclosure Express to September’s auction, which still promises to be the biggest ever.”

Although these property owners have received a temporary reprieve, it doesn’t solve the underlying problem of Detroit property tax rates being 400% to 500% above market value.

As MFI-Miami discovered when we saved Kelly Parker from being evicted from her home by Wayne County in 2012,

“Kelly Parker’s fight for her house uncovered a serious problem for the City of Detroit and Wayne County and it is one of the dirty secrets that is contributing to the mass exodus of people leaving the City of Detroit.  It is also one that has the potential of expanding the FBI’s ongoing corruption investigation of the government of Wayne County and the City of Detroit.

When we began researching Kelly’s property tax records, one of the first things my staff did was call several real estate agents to pull comparable sales in Kelly’s neighborhood going back to 2009.  We did this because something didn’t seem quite right with numbers on Kelly’s tax bills.  According to the tax bills for those years supplied by Wayne County Deputy Treasurer David Szymanski, it appears the City of Detroit and Wayne County were using grotesquely inflated values when calculating Kelly Parker’s tax bills.  According to Kelly’s tax bills, the City of Detroit was assessing the value of her home based on the following values:

2009:  $59,228

2010:  $52,120

2011:  $45,866

I had two Real Estate agents pull comparable property sales from Kelly’s neighborhood  for 2009, 2010 and 2011.  They found 7 sales in 2009, 6 in 2010 and 8 in 2011.  As you can probably already guess, those values were nowhere near the number supplied by Wayne County.  Here’s the average value on the properties they found:

2009: $12,430
2010: $9,851
2011: $8,357

As you can see, Wayne County used unrealistic values that were between 476% to 548% higher than what they should be.

These figures lead to an interesting question of how the City of Detroit and Wayne County could get away with this.  The answer is pretty simple.  The City of Detroit assumes that any homeowners still living in Detroit are in programs like FHA that require their taxes and insurance be paid into an escrow when the homeowner makes their monthly mortgage payment.   The City is also banking on the fact that the majority of homeowners like Kelly Parker won’t notice that they are being over charged.  They are also hoping Detroit homeowners are too lazy or are incapable of doing the math to figure they are being ripped off.”