By If you own real property with substantial equity, here is a warning worth taking seriously: never let the government sell it for unpaid taxes.
A recent U.S. Supreme Court decision, Pung v. Isabella County, shows why. A Michigan family disputed a property tax bill of $2,241.93. They took the assessor to the state tax tribunal and won. The assessor imposed the tax again; the family litigated a second time, and they won again. The county foreclosed anyway.
The home, which the county itself had valued at $194,400, sold at public auction for $76,008—about 39 percent of its value. Eighteen months later, the auction buyer resold it on the open market for $195,000.
The family sued, arguing they were entitled to fair market value minus the tax debt. A unanimous Supreme Court disagreed. When a tax sale is fairly conducted, the actual auction price—not fair market value—is the baseline for just compensation. The family recovered only the $73,766 surplus. Measured against the county’s own valuation, they lost roughly $118,000 over a $2,242 dispute.
You do have a constitutional right to the surplus proceeds after taxes and costs, but you may have to follow state claim procedures and deadlines to collect it.
The practical lesson is to act well before any redemption deadline. Tax auctions routinely produce prices far below market value, so you will almost always do better refinancing the property, borrowing against it, or selling it yourself and paying the taxes from the proceeds.
Also, read every tax notice you receive. If a bill looks wrong, contest it. But understand that winning on the assessment does not automatically stop a foreclosure already underway.
If you want to discuss tax sales, please call me directly at 408-778-9651.