Loophole lets property owners skip tax
Property owners in Detroit are avoiding taxes by letting their homes and businesses go into foreclosure for unpaid taxes and then buying them back for $500.
Property owners in Detroit have found a novel way to avoid taxes: Let their properties go into foreclosure and then buy them back from the county for $500 each.
Landlord Jeffrey Cusimano avoided about $600,000 in taxes and liens by letting 34 of his properties go into foreclosure and then buying them back at auction, The Detroit News reported. He owes about $338,000 in taxes on 53 other properties that are headed for foreclosure.
"It's the times," Cusimano told The News. "I had my eye on 30 others in better neighborhoods if I couldn't get these."
The News calculated that owners of 400 properties were able to erase $4.7 million in taxes and liens last fall by buying back their own homes and businesses.
This would be a risky practice in cities where investors compete to pick up the good properties at tax auctions. In Detroit, however, which has lost significant population and has many vacant homes and businesses, it's rare for anyone to bid against the former owners at auction. The county first offers the homes at a price equal to the unpaid taxes and liens plus $500. But if no one bids -- and usually no one does -- the properties are offered the next month for $500 each. (Post continues after video.)
Detroit officials are calling on the Legislature to make it impossible for owners to buy back their foreclosed properties to avoid taxes. The state allows the county to do that, but Wayne County Treasurer Raymond Wojtowicz said that would be too difficult to enforce with the volume of foreclosure sales.
It's not just investors who take advantage of the loophole, The News reports. Nonprofit groups are helping impoverished homeowners wipe out taxes and delinquent water bills by doing the same thing.
"They owe so much and have so little," Ted Phillips of the United Community Housing Coalition told The News. "This is their only option."
Property owners say annual tax bills in some cases exceed the value of the homes.
More than 42,000 property owners in Wayne County -- 60% more than last year and 90% of them in Detroit -- are facing foreclosure because of three years of unpaid property taxes, the Detroit Free Press reported.
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This is what happens when you support the unions! especially in the government!
Think about it , Obamas economy is in the tank and the union teachers , firefighters, police and motor vecicle workers, and all of the breauacrats get automatic raises, they get early retirement and free medical. They do not contribute anything to there retirement fund and again get to take it early!! I am not against any of these professions by there has to be some reality!
When the property taxes of any area is Higher than the value of your home, or someone has to see how high the taxes are before they decide to buy a house or what to charge for rent this is not a good thing, But every time your housing taxes go up just remember the Union caused this , (your property taxes is what is paying for this) I have been amazed how many people did not know this! So remember when Grandma is forced out of her house because of back property taxes Thank those who support the union in government !
More clearly stated: They have been trusted enough to have been given contracts (mostly when their credit does not justify them) to pay those who trusted them, but now on second thought, maybe it would be socially proper justice to have taken the loan and then not pay it back................like the 75+!% of losers decide to do (why should they be forced to do what the rest of us who supply all things for survival already)! Ah, the marvels of a society that rewards those who are only on the taking side of the equation!
Just like the stock market, the residential real estate market now seems like it is mostly a den of thieves. But, I agree with several previous posts. In fairness to the landlord, Jeffrey Cusimano, why should anyone be expected to pay an average of $15,000 in taxes on a piece of property which is obviously only worth $500 in the market? That’s a tax rate of 3,000%. This outcome is the fault of the tax authorities failing to recognize the catastrophic decline in property values as much as it is the fault of property owners. Typical government; too little too late.
Taxes that are higher than the value of the houses! This folks is just the beggining of the anti american socalist progressive agenda! This is what socalism does, you morons that let yourselves be used by this administration deserve what you get !!! The tax the rich mantra that the mindless Obama/ sorus lovers at any cost keep spouting is just a cover to what is really going on. Kind of like Clintons "alternative tax" this was suppose to keep the rich from claiming to many deductions. But with a couple of alterations it affected anybody who made 30,000 or more.
If any of you wannabe socalist out there believe Obama is only going to tax the "rich" then i understand why he has even a prayer to be reelected. How many Millionairs are there? How many billionairs are there? Take all (of there money every penny) and you would not put a dent in Obamas spending? Not to mention killing all job creation and investment. But you would get you socalist utopia untill there money ran out. See even Obama knows that he has to keep them producing so he can have someway to devide and conquor the stupid and uneducated!
But back to point, Do you really think by Obama's adding 7% to the top wage earners taxes he will compensate for his reckless spending? Or would (after it passes) make a couple behind closed door changes and close a couple of tax right offs that affects 200,000 million americans making 30,000 or less. Where do you think he will make the most money ? Do not give him a inch! Obama and the socalist will have us all living like detroit ! Remember it is the democats support for the unions and socaial "entitlements" for votes mentality that has made detroit into what it now is.
If people were doing this to the banks, you would all be saying YES and ALRIGHT GIVE THE RICH WHAT THEY DESERVE. Do it to the corrupt and confiscatory government who is worse than any banker and you get mad. You people are just idiots.
In the Depression more people loss their homes to the governments than to the banks. Finally, the government is getting screwed and I applaud these people. Those who have money and those that do not.
Why would a landlord or anyone else pay property taxes on property that has less value than the taxes owed? I sure as hell wouldn't.
And buying it back for $500? Whose fault is that? The city government allows it to happen, so get off your high and mighty soap box and all your rhetoric about things that have nothing to do with the matter at hand.
If you think about it, the landlord re-acquiring the property is a good thing. After all no one else wants it. By doing this, he has some purpose in mind for it. Maybe to rent, to sell, or whatever. If he hangs on to it, he'll be liable for the property taxes too.
Taxes that high are confiscatory! Shame on them.
No need to change any laws. Now that the cat's out the bag due to this article, the loophole will close itself. I suspect from this point on, the property owners are going to actually have competing bidders.
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