The Detroit News said the investigation was triggered by a series of stories the newspaper wrote in February that showed many properties were over-valued in appraisals.
Frequently, the appraisals came to 10 times the selling prices of the house, the News said.
The newspaper also said 94 percent of the property sales in the city were considered invalid for comparative reasons, when city tax officials were trying to determine the value of a residential property.
The State Tax Commission's three-member panel agreed unanimously to hire and independent firm to study 500 randomly selected property appraisals.
"I'm not saying there is a problem, but I am concerned enough to have a second look," said the panel's Chairman Doug Roberts.
The city's chief assessor, Linda Bade, said her office would cooperate with the investigation.
Even small adjustments in the appraisals could cost the city millions of dollars in tax revenue, the News said.
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