Supreme Court Addresses Tax Foreclosure Sales, Leaves Key Questions Open

The U.S. Supreme Court recently issued its decision in Pung v. Isabella County, a case focused on tax foreclosure sales, holding that “the proper baseline under the Takings Clause is the price obtained in a tax sale, at least when the sale is fairly conducted in light of our country’s history of tax sales.”

As previously reported, the National Association of REALTORS® (NAR), joined by the American Property Owners Alliance, Michigan REALTORS®, and the Wisconsin REALTORS® Association, submitted an amicus briefpdf supporting the Michigan family at the center of the case and their effort to protect home equity following a tax foreclosure.

The dispute arises from a Michigan home the Pung family purchased in 1991 for $125,000 and continuously occupied as their primary residence. Years later, a local tax assessor improperly reclassified the property as a second home, resulting in additional taxes. Although a state tax tribunal ultimately determined those taxes were not owed, the county nevertheless moved forward with foreclosure based on a disputed bill of approximately $2,242. The home was foreclosed and sold at a tax auction for $76,008, significantly below its tax assessed value of $194,400. Less than 18 months later, the home was resold on the open market for roughly $195,000. While subsequent litigation returned the surplus from the auction to the family, the family maintained that they were deprived of the full value of their home equity.

The Supreme Court’s decision builds on its 2023 ruling in Tyler v. Hennepin County, which affirmed that homeowners have a constitutional right to any surplus equity following a tax foreclosure. In Pung, the Court addressed how that equity should be measured, holding that auction sale price may serve as the benchmark in many cases, provided the sale is fairly conducted. While the decision reinforces that governments cannot take more than they are owed, it leaves open important questions about the fairness of tax foreclosure sales.

The case now returns to the Sixth Circuit, where these issues may be examined further. In the meantime, the decision keeps the conversation active for policymakers, courts, and industry stakeholders evaluating reforms to tax foreclosure systems.

NAR will continue to advocate for policies that protect property rights and ensure homeowners are not unfairly deprived of their equity, and will provide updates as the case progresses.