F.A.Q

"What is a "perc" test and why is it important to a buyer when purchasing vacant land?"

"Many parcels of land available for private residential homes are not served with a public sewer system or a public water system. Homes developed in these areas are served by the private septic tank-absorption field system of wastewater disposal and a private well water supply.

When contemplating the purchase of property to be used as a building site, seek the assistance of your local environmental health representative at the Western U.P. District Health Department BEFORE you purchase the property. Your local environmental health representative will provide for an evaluation of the property to determine if the necessary permits can be obtained for a private well water supply and/or a wastewater disposal system. Many vacant parcels are not suitable, or at best marginal, for a private water supply and/or a private sewage disposal system.

Know and understand what you are buying. If you are buying vacant land be sure you have a Buyers Agent from North Wind Real Estate to guide you through this process.

CLICK HERE FOR FOR A VIRTUAL TOUR ON THIS SUBJECT"

"How are property taxes calculated?"

"Your property tax is based on the Taxable Value of your home and the sum of all tax rates levied by the city, village, or township in which you reside. These will include taxes for the county, the local school district, the intermediate school district, the Community College and any special assessment that may apply to your community or neighborhood.

The State of Michigan allows a reduced Homestead tax rate for a property that is the primary residence of the owner. Second homes, commercial and rental properties are considered Non-homestead and are taxed at a higher rate.

Assessment
The true market value of property can only be determined upon a sale. Thus, governments use a method known as assessment to assign value to a property. The Assessor will estimate a property's value base upon the sale of similar homes in the property's market area.

State Equalized Value (SEV)
Once an Assessor has estimated the market value of a property, they are required to record 50% of that amount as the State Equalized Value. A home's State Equalized Value will change annually to reflect fluctuation of local property values. It will not increase radically unless major construction improves the property, or the property changes hands.

Capped Value and Taxable Value (TV)
The Assessor annually calculates the Capped and Taxable Value of each property. The Capped Value is calculated by multiplying the previous year's Taxable Value by the Consumer Price Index (CPI), but not to exceed 5%. Additions, such as a new four season room, are factored in. The result is the Capped Value for the current year. The lesser of the State Equalized Value and the Capped Value become the Taxable Value. The "capping" process will continue annually until ownership is transferred. When a change of ownership occurs, the next Taxable Value will be based on the State Equalized Value. The actual sales price of a property is not the sole basis of the new State Equalized Value for that property.

Summary
Assessment- Assessor's opinion of the true market value of a home based on comparable properties in the market area.
State Equalized Value (SEV)- 50% of the appraised market value.
Capped Value- Last year's taxable value increased by the amount of the Consumer Price Index (maximum of 5%) plus any construction changes.
Taxable Value (TV)- The lesser of the State Equalize Value and Capped Value. Taxable Value is used for the calculation of property tax."

"What is the Commercial Forest program and how does it affect property taxes on vacant land?"

"The Commercial Forest program provides a property tax reduction to private landowners as an incentive to retain and manage forestland for long-term timber production. Landowners participating in this program pay a reduced property tax. Beginning January 1, 2007 through December 31, 2011 that is $1.20 per acre. Beginning January 1, 2012 and every 5 years after that date, the amount of specific tax will be increased by 5 cents per acre. Additionally, the State of Michigan pays $1.20 per acre annually to each county where land is listed in the program.

There are approxiately 2.2 million acres listed in this program under the ownership of nearly 1700 private landowners. Landowners include private individuals, clubs, forest industry, and other businesses.

Landowners in this program agree to develop, maintain and manage the land as commercial forest through planting, natural reproduction, or other silvicultural practices. Applications to list land in the program must be postmarked no later than April 1 to be considered for listing in the next tax year.

Withdrawal penalties can be substantial depending on how long the property has been enrolled in the program. If you are considering removing property you own from the program, contact the DNR for more information.

Lands listed in this program are open to the public for hunting, trapping and fishing. The CF lands are not public lands. These lands are private lands under the control of private owners, who through CF allow the public the privilege of hunting, trapping and fishing only. The CF lands are not posted or signed as Commercial Forests and may be fenced and/or gated. While permission to hunt, trap or fish on CF lands is not required, we recommend you notify the landowner of your intention to do so. It is a courtesy they will appreciate, and it will contribute to your own safety.

Although the general public has a right to hunt, trap and fish on these lands, the property is privately owned and subject to normal private property rights.

Unless you have permission of the property owner, the right to hunt, trap or fish on the land does not extend to associated activities such as the following:
*Littering
*Camping
*The cutting of shooting lanes, or the cutting or destruction of brush, trees or other plants for any purpose.
*The use of nails, bolts, wire, tree steps or other materials or activities which harm, lessen or destroy the value of trees.
*The construction of blinds or the construction or placement of other structures, except for the gathering of dead materials found on the ground.
*Target-shooting or sighting-in firearms.
*The use of ORV's or other vehicles on private property when prohibited by fencing or posting. If vehicles are allowed, care should be taken to avoid blocking access to roads or parking areas.
*A person engaging in an activity not allowed by a property owner may be criminally or civilly liable, or both.

CLICK HERE FOR A SUMMARY OF THE COMMERCIAL FOREST PROGRAM"

"What is a 1031, like-kind, exchange and how does it affect capital gains taxes?"

"A 1031 (Internal Revenue Code) provides one of the best tax strategies for deferring the capital gain tax that would ordinarily be assessed on the sale of investment property-the tax deferred exchange. By utilizing an exchange to defer the capital gain tax, the property owner has substantially more equity to reinvest in a replacement property. The tax code states: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or for investment." Every dollar saved in taxes allows an investor to purchase substantially more real estate.

A typical tax deferred exchange (a 1031 exchange) is very similar to a taxable sale transaction except that prior to closing on the property being sold a qualified intermediary is assigned into the sales contract and instructs the closer to transfer the exchanger's property to the buyer via direct deeding. The exchange proceeds (equity) are deposited into a separate exchange account to comply with the exchange requirement that the exchanger is not in actual or constructive receipt of the funds at any time during the exchange. The exchange period begins with the transfer of the first property and allows the exchanger 45 days to identify property and a total of 180 days to close on "like-kind" replacement property. The exchange is completed when the qualified intermediary is assigned into the purchase contract, uses the exchange proceeds to acquire the property and instructs the closer to transfer ownership from the seller to the exchanger via direct deeding.

FOR MORE INFORMATION ON TAX DEFERRED EXCHANGES PLEASE CLICK HERE"

"What is the $8,000 home buyer tax credit?"

"The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

The tax credit does not have to be repaid.

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
FOR MORE INFORMATION ON THE $8,000 TAX CREDIT CLICK HERE "