[BUYING AND SELLING REAL ESTATE IN THE UNITED STATES - MICHIGAN]
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county with a population over 2 million may charge as much as $0.75 per $500. The state transfer tax is $3.50 per $500 in consideration. There are several transfer tax exemptions mostly involving family or related party transactions with little consideration. B. Buyer and seller adjust for water, sewer, gas/oil, electricity, and taxes. Depending on what part of the state the property is located, proration of taxes varies by local custom. The most common methods for pro rating taxes are: (1) paid in advance, due date basis (favors seller), (2) calendar year and (3) paid in arrears, due date basis (favors buyer). With retail or multi-family commercial properties, closing adjustments also include, among others, rents, management/operating expenses, and common area maintenance expenses. C. Certain lands used for agricultural purposes pay reduced taxes that, in some instances, may be clawed back if the agricultural use is terminated. D. Standard federal income tax withholding is required for sellers who cannot provide a non-foreign FIRPTA affidavit. IX. OTHER CLOSING DOCUMENTS A. Residential Property – If the property is to be used as a principal residence, the seller should rescind any PRE, or “Personal Residence Exemption” seller may have (results in lower property taxes), and the buyer should promptly file a PRE form with the local assessing unit. B. If the property is leased (residential or commercial/industrial) and if the lease is to be terminated at or before closing,
a lease termination instrument signed by the tenant should be provided. If the lease(s) is to continue after the sale and purchase, an “assignment and assumption of lease(s)” instrument should be executed by the seller and buyer. C. Title insurance is always recommended and an effective review of title to the property is nearly impossible without a title commitment (and copies of all exceptions to the seller’s title that survive closing) being provided, which commitment is the basis for the title policy issued at closing. Typically, the seller pays the premium charged to issue the title insurance policy. Buyer is responsible for a title policy required for any purchase money financing. X. RECORDING REAL ESTATE DOCUMENTS Deeds and any other documents evidencing an encumbrance on title are recorded at the Register of Deeds for the County where the
property is located. XI. PROPERTY TAXES
A. Real Estate Taxes 1. Real property is assessed for taxes based on its true cash value that is to be determined annually by the local assessing unit. The assessed value is to represent 50% of the true cash / fair market value. 2. Michigan has a “cap” on increases in a property’s taxable value that is
tied to inflation. The taxable value stays low (no more than 5% increase annually) regardless of any increase in the fair market value of the property and is reset to equal assessed value anytime there is a
ILN Real Estate Group – Buying and Selling Real Estate Series
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