To help the city recover, a mix of government, nonprofit and corporate partners are collaborating to support homebuyers in Detroit. From detailed seller disclosure laws to special assistance for people buying or facing a foreclosure, the state and city encourage responsible homeownership as a part of community investment. Here’s what you need to know about the laws and taxes governing homebuying and homeownership in Detroit.
Home seller and buyer laws
Homebuyers and sellers in Michigan are not required to work with a lawyer for their home transactions, although they will need to use the services of an escrow or title company. In Michigan, all sellers are required to provide buyers with an extensive property disclosure statement detailing their knowledge of any defects in their home or its surroundings.
In Michigan, foreclosures are typically non-judicial (meaning they aren’t processed through court activity), although judicial foreclosures sometimes do occur. When a home is sold as part of the foreclosure process, it’s possible for the buyer to face a suit for a deficiency judgment — a balance owed representing the difference between the price the home sold for and what it is worth. But homeowners who are struggling to pay their mortgage in Detroit may find help through Michigan’s Step Forward program, which offers supplementary assistance of up to $30,000 for homeowners facing foreclosure due to financial hardship or other issues.
When a couple buys property together in Michigan, they need to be aware that Michigan is an equitable distribution (versus community property) state. This means that, in the event of a divorce, the property will be divided equitably but not necessarily equally, unless that particular split is proven to be equitable.
Transfer taxes, which must be paid at recording, cost $1.10 per $1,000 in Wayne County, where Detroit is located, meaning the tax on a $100,000 transaction would be $110. The state also charges transfer taxes of $3.75 per $500 of property value. Your lender will disclose the transfer tax to be paid as part of the borrowing process, and the seller typically pays these taxes.
Several transaction types are exempt from transfer taxes, such as very small property deals below $100 or quit-claim deeds commonly used to add or adjust the names listed on a property’s title. For exemptions, visit the county website.
Wayne County has a median property tax of 2.07% of a home’s assessed fair market value, according to Tax-Rates.org. The county’s rate is one of the highest in the country, and Tax-Rates.org ranks it as 278th out of 3,143 counties. This means residents in the county pay a median of $2,506 per year in property taxes. This is high, even though Detroit home values trend lower than national averages.
But if paying your property taxes is unaffordable for you, Michigan and the City of Detroit offer certain exemptions that may be able to help. Michigan offers a homestead property tax credit for households with income below $50,000 and whose homes are valued at less than $135,000. In addition, Detroit offers a full or partial property tax exemption for homeowners who meet specific income requirements. Seniors, veterans and surviving spouses, and disabled people may be eligible for additional tax relief. You can find out more information about property tax exemptions in Detroit here.
Conforming loan limits
The conforming loan limit in Wayne County is $484,350 for a single-family home. Conforming loans meet terms and conditions that qualify them to be backed by Fannie Mae and Freddie Mac. Limits are set annually by the Federal Housing Finance Agency.