A new case before the United States Supreme Court could influence how surplus funds from tax foreclosure sales are calculated across the country. For tax sale investors, counties, and property owners, the outcome may affect how value is measured and what qualifies as just compensation after a tax debt is satisfied.
This summary is based on a recent Tax Sale Insiders discussion featuring tax attorney Matt Abee, who outlined the legal background and potential impact of Pung v. Isabella County.
What the Case Is About
The case centers on a Michigan property owner whose home was sold after unpaid property taxes totaling about 2,000 dollars. The property later sold at tax auction for about 76,000 dollars. The former owner argues he is entitled not only to the surplus between the tax debt and the auction price, but also to the increase in value after the buyer renovated and resold the property for about 195,000 dollars.
The legal questions involve the Fifth Amendment Takings Clause and the Eighth Amendment Excessive Fines Clause. The Supreme Court is being asked to decide whether surplus value should be measured based on the auction price or a separate determination of fair market value.
How We Got Here
This case follows the Supreme Court’s 2023 decision in Tyler v. Hennepin County, which ruled that governments cannot keep surplus equity beyond unpaid taxes. That decision led many states to revise tax foreclosure statutes.
In Pung, the issue moves beyond whether surplus must be returned. The dispute focuses on how surplus should be calculated and whether a public tax auction establishes fair market value for constitutional purposes. The Sixth Circuit Court of Appeals ruled in favor of the county, and the Supreme Court agreed to review the case. More than 25 amicus briefs have been filed, including one from the federal government.
The Story
The property owner had multiple opportunities to resolve the delinquent taxes before foreclosure. After the sale, the winning bidder reportedly invested time and capital into rehabilitating the property before reselling it. The former owner claims the higher resale price reflects the true value at the time of foreclosure.
Attorneys supporting the county argue that value must be measured at the time of the tax sale, not after improvements made by a private buyer. They also note that tax sales differ from traditional real estate transactions. Investors cannot access properties for inspections, cannot negotiate repairs, and must account for title and condition risk when bidding. These constraints influence pricing at auction.
Why This Matters for the Tax Sale Industry
If the Court rules that auction prices are not a valid measure of value, courts may be required to determine property value after the fact. That could introduce expert valuation disputes into tax foreclosure cases nationwide.
A ruling that fair market value must be calculated independently of auction results could affect tax lien and tax deed states, mortgage foreclosure processes, and other government lien enforcement systems. It may also change how investors assess risk and how counties structure future sales.
What Happens Next
Oral arguments are scheduled before the Supreme Court on February 25. A decision is expected before the end of the Court’s term in June.
The Court could rule that a properly conducted public auction establishes value. It could require a fairness review of how the sale was conducted. It could also determine that courts must calculate value separately from auction results. Each outcome carries different implications for governments and investors.
What This Means for Investors
Staying informed on legal developments like Pung v. Isabella County is critical for anyone active in tax lien or tax deed investing. Changes in how courts define value, surplus, and compensation could directly affect bidding strategy, risk analysis, and portfolio planning.
At Tax Sale Resources, we provide the data, research tools, portfolio management software, and investor support needed to navigate an evolving legal and market landscape with confidence. If you want deeper insight into tax sale opportunities, due diligence tools, or ways to better manage your investments, connect with our team to learn how our platform can support your strategy.
