Michigan Property Taxes When Selling a House: What Homeowners Should Know

Michigan property taxes can become an important part of selling a house, especially when there are unpaid tax bills, a principal residence exemption, an upcoming tax bill, or questions about what happens to the property’s taxable value after the sale.

If you are selling a Michigan home, property taxes do not simply disappear at closing. The title company or closing agent will review the tax status of the property, and the purchase agreement will help determine how current taxes are handled between the seller and buyer.

This guide explains Michigan property taxes when selling a house, including tax prorations, delinquent taxes, the Principal Residence Exemption, taxable value, what happens after ownership changes, and how property taxes can affect your proceeds at closing.

Do You Have to Pay Property Taxes When You Sell a House in Michigan?

Property taxes associated with the home still need to be addressed when the property is sold.

Depending on the timing of the sale and the terms of the purchase agreement, taxes may already have been paid, may still be due, or may be allocated between the buyer and seller on the closing statement.

The exact treatment can depend on:

• The closing date
• The municipality where the property is located
• Whether a summer or winter tax bill has been issued
• Whether the taxes have already been paid
• The terms of the purchase agreement
• Whether any taxes are delinquent

Your title or closing company should identify outstanding property taxes before closing.

How Michigan Property Taxes Work

Michigan property taxes are based primarily on a property’s taxable value and the applicable millage rates.

Two terms homeowners commonly see on their tax records are assessed value and taxable value.

Assessed Value

Michigan generally assesses real property at approximately 50% of its true cash value, subject to the state’s property tax laws and assessment procedures.

Taxable Value

Taxable value is the figure used to calculate the property’s tax obligation.

For a property that has not recently experienced a taxable transfer of ownership, increases in taxable value are generally limited each year, subject to additions, losses, and other statutory rules.

This is why a homeowner who has owned a property for many years may have a taxable value significantly below the property’s current assessed value.

What Happens to Property Taxes After a House Is Sold?

A transfer of ownership can cause an important change to the property’s taxable value.

When a transfer qualifies as a transfer of ownership under Michigan law, the property’s taxable value generally becomes uncapped in the calendar year following the transfer.

That means the new owner’s future property tax bill can be different from the seller’s current tax bill.

This is particularly important when a property has been owned for a long time and the seller’s taxable value has remained well below the property’s current state equalized value.

Does Michigan Automatically Tax a House Based on the Sale Price?

No. A sale does not mean the local assessor simply takes the purchase price and automatically uses half of that exact amount as the property’s new taxable value.

The assessor determines the property’s value according to Michigan assessment rules.

The sale price can be relevant market information, but it is not automatically the property’s assessed value or taxable value.

What Does “Uncapping” Property Taxes Mean?

Michigan limits annual increases in taxable value for properties that remain under the same ownership, subject to certain exceptions.

After a qualifying transfer of ownership, that limitation is generally removed for the following calendar year. This is commonly called an uncapping of taxable value.

The property’s taxable value is then generally reset to its state equalized value for that year.

Afterward, the normal annual taxable-value limitations generally begin applying again.

Will the Seller’s Property Tax Bill Be the Same for the Buyer?

Not necessarily.

This is one of the most important things buyers and sellers should understand about Michigan property taxes.

A seller who has owned a house for many years may have a relatively low taxable value. After the property transfers, the taxable value may uncap the following year.

As a result, the buyer should not assume that the seller’s current property tax bill accurately predicts what the buyer will pay in future years.

This generally affects the buyer after the transaction rather than creating an additional future tax bill for the seller.

What Is the Michigan Principal Residence Exemption?

Michigan’s Principal Residence Exemption, commonly called the PRE, can reduce the property tax burden on a qualifying owner’s primary residence.

The exemption generally removes up to 18 mills of local school operating taxes from a qualifying principal residence.

To qualify, the property generally must be owned and occupied as the owner’s principal residence under Michigan law.

The PRE is different from Michigan’s homestead property tax credit.

What Happens to the Principal Residence Exemption When You Sell?

If a property is no longer the owner’s principal residence, Michigan has rules concerning rescission of the exemption.

Homeowners should make sure the appropriate PRE paperwork is handled when moving from or selling a property.

In some circumstances, Michigan also allows a homeowner who moves to a new principal residence to conditionally retain the PRE on a former residence for a limited period while that property is for sale, provided the statutory requirements are satisfied.

Those requirements can include the former residence being:

• For sale
• Unoccupied
• Not leased
• Not used for a business or commercial purpose

Homeowners should confirm eligibility with the local assessor or Michigan Department of Treasury before relying on a conditional rescission.

What Are Property Tax Prorations at Closing?

Property tax proration is a way of allocating property taxes between the buyer and seller based on the terms of their transaction.

The closing statement may include a credit or charge related to property taxes so that the parties are responsible for the amounts assigned to them under the purchase agreement.

The calculation can depend on whether a particular tax bill has already been issued or paid and on the proration method required by the contract.

Because local tax billing and purchase agreements can differ, sellers should review the actual closing statement rather than assuming how taxes will be divided.

Who Calculates the Property Taxes at Closing?

The title company or closing agent will typically obtain tax information and prepare the tax-related charges or credits shown on the settlement statement.

This can include reviewing:

• Current property tax bills
• Payment status
• Delinquent taxes
• Applicable penalties or interest
• Purchase agreement requirements
• Tax prorations

Review these figures before signing your final closing documents.

Can You Sell a House With Unpaid Property Taxes in Michigan?

Potentially, yes.

Having unpaid property taxes does not automatically prevent a homeowner from selling the property.

If there is enough equity in the house, delinquent taxes may be paid from the seller’s proceeds as part of the closing.

For example, the closing agent may identify the amount necessary to resolve the delinquent tax balance and include that amount among the charges paid through closing.

The remaining proceeds would then be distributed to the seller after the other required payoffs and closing expenses are handled.

For a more detailed explanation, read our guide on how to sell a house with back taxes in Michigan.

What Happens When Michigan Property Taxes Become Delinquent?

Michigan has a formal process for delinquent real property taxes.

Generally, unpaid taxes from the preceding year are returned to the county treasurer as delinquent on March 1.

Once taxes become delinquent, additional interest and fees can begin accumulating.

If the taxes remain unpaid long enough, the property can move through Michigan’s forfeiture and tax-foreclosure process.

This process takes place over multiple years, but homeowners should not assume they have unlimited time to act.

Can Unpaid Property Taxes Lead to Foreclosure?

Yes.

Michigan’s property tax system includes a statutory forfeiture and foreclosure process for real property with unresolved delinquent taxes.

As the delinquency continues, the homeowner can face additional:

• Interest
• Administrative fees
• Notice costs
• Forfeiture-related charges
• Eventually, foreclosure proceedings

If you have received delinquency, forfeiture, or foreclosure notices from a county treasurer, do not rely solely on a general online article. Contact the county treasurer or an appropriate professional to determine the property’s actual status and deadlines.

Can You Sell Before a Property Tax Foreclosure?

There may be opportunities to sell a property before the tax foreclosure process eliminates the owner’s rights, but timing matters enormously.

The title company will need to determine what amount must be paid to clear the delinquent taxes and whether the seller still has the legal ability to transfer the property.

If you are considering selling because of delinquent taxes, beginning the process earlier generally provides more options than waiting until the final stages of foreclosure.

What If the House Also Has Other Liens?

Property taxes may not be the only amount that must be resolved at closing.

A title search may also reveal:

• Mortgage liens
• Judgment liens
• Contractor liens
• Municipal charges
• Old recorded mortgages
• Other title defects

Some liens can be paid from the sale proceeds if there is enough equity in the property.

See our guide on selling a house with liens or title problems in Michigan.

How Do Property Taxes Affect Your Net Proceeds?

When deciding whether a sale price works for you, focus on the amount you are likely to receive after closing rather than only the headline purchase price.

Your sale proceeds may be reduced by:

• Mortgage payoff
• Delinquent property taxes
• Tax prorations
• Liens
• Michigan transfer taxes
• Title and closing expenses
• Agent compensation, when applicable
• Buyer concessions
• Other agreed-upon selling costs

For a broader breakdown, read our guide on how much it costs to sell a house in Michigan.

What If You Cannot Afford Repairs and Property Taxes?

A homeowner dealing with both property taxes and major repairs may not want to put additional money into the house before selling.

A property can potentially be sold in its existing condition instead.

This may be worth considering when the house needs:

• Roof replacement
• Foundation repairs
• Electrical work
• Plumbing work
• HVAC replacement
• Extensive interior updates
• Major cleanup

Learn more about selling a house that needs repairs in Michigan or selling a Michigan house as-is.

Does Selling for Cash Eliminate Property Taxes?

No.

A cash sale changes how the buyer funds the purchase, but it does not automatically eliminate taxes, liens, or other obligations attached to the property.

The benefit of a cash transaction is that there is generally no buyer mortgage underwriting process. That can simplify one part of the transaction, but title and tax issues still need to be addressed.

For a full comparison, read cash home buyers vs. a traditional sale in Michigan.

What Property Tax Information Should You Gather Before Selling?

Before listing or entering into a purchase agreement, it can help to gather:

• Your most recent property tax bills
• Proof of any recent tax payments
• The property’s parcel identification number
• Information about any delinquent taxes
• Any county treasurer notices
• Your Principal Residence Exemption information
• Mortgage and escrow information
• Any notices concerning liens or assessments

You can also contact the local or county treasurer to verify balances when necessary.

Common Property Tax Mistakes When Selling a Michigan House

Property tax issues are easier to handle when they are identified early.

Common mistakes include:

• Assuming the current tax bill will be the buyer’s future tax bill
• Waiting until closing to investigate delinquent taxes
• Ignoring letters from the county treasurer
• Confusing assessed value with taxable value
• Assuming the sale price automatically becomes the new assessed value
• Forgetting about Principal Residence Exemption requirements
• Estimating net proceeds without accounting for tax balances
• Assuming a cash sale eliminates tax or title problems

Frequently Asked Questions

Do I have to pay all property taxes before selling my Michigan house?

Outstanding property taxes generally need to be addressed as part of the transaction. Depending on the circumstances, certain amounts may be paid through closing from the seller’s proceeds rather than being paid separately beforehand.

Can delinquent property taxes be paid at closing?

Often they can if the transaction has sufficient proceeds and the tax balance can be resolved through closing. The title company should verify the amount due.

Will my buyer pay the same property taxes I pay?

Not necessarily. A qualifying transfer of ownership generally causes the property’s taxable value to uncap in the calendar year following the transfer, which can affect the buyer’s future property taxes.

Does the assessor automatically use my sale price to calculate taxes?

No. Michigan assessment rules do not allow an assessor to automatically set the property’s assessed or taxable value based solely on the sale price.

What is the Principal Residence Exemption?

The Michigan Principal Residence Exemption generally exempts a qualifying owner’s principal residence from up to 18 mills of local school operating taxes.

Can I sell a house that is behind on taxes?

Potentially. The amount owed, property’s equity, stage of delinquency, and legal status of the property all matter. Sellers facing advanced tax foreclosure should verify their deadlines immediately.

Does selling as-is change the property taxes owed?

No. Selling as-is concerns the physical condition of the property. Property taxes and tax liens still need to be handled separately.

Talk With M&N Legacy About Your Michigan Property

If property taxes, repairs, liens, or other issues are making it difficult to sell your Michigan property, M&N Legacy can review the situation and discuss possible selling options.

Depending on the transaction, M&N Legacy may purchase a property directly, assign its contractual interest to another qualified buyer, or work with an investment partner. The applicable transaction documents should explain the structure of the sale.

Contact M&N Legacy to tell us about your property and discuss your situation. There is no obligation to move forward.

For additional homeowner resources, visit our Michigan home selling page.

This article is for general informational purposes only and is not legal, tax, financial, or real-estate advice. Property taxes, exemptions, tax prorations, assessments, liens, and foreclosure deadlines depend on the property and transaction. Confirm current amounts and deadlines with the appropriate local or county treasurer, assessor, title company, attorney, or tax professional.