Supreme Court: After a Tax Foreclosure, You're Owed the Auction Price, Not Your Home's Value (Pung v. Isabella County, 2026)

Supreme Court: After a Tax Foreclosure, You're Owed the Auction Price, Not Your Home's Value (Pung v. Isabella County, 2026)

The U.S. Supreme Court ruled unanimously on June 23, 2026 that when the government forecloses on a home for unpaid property taxes and sells it at auction, the former owner's "just compensation" is the surplus from the sale price, not the property's higher fair market value (Pung v. Isabella County, No. 25-95).

Information last verified on June 24, 2026. This is a developing story; we update it as the record changes.

Status: Decided by the U.S. Supreme Court on June 23, 2026 (unanimous on the just-compensation question). The Court vacated and remanded the separate procedural-fairness challenge to the Sixth Circuit, which remains unresolved.

Jurisdiction scope: This article addresses the federal constitutional rule on just compensation after a property-tax foreclosure, decided by the U.S. Supreme Court and binding nationwide. It is general legal information, not legal advice. For related state property and possession topics, see Michigan squatters rights laws and the broader squatters rights and adverse possession hub.

What Happened

The Pung family owed $2,241.93 in real-property taxes on a home in Isabella County, Michigan. The county initiated foreclosure proceedings and sold the home at public auction. The property carried a tax-assessment value of $194,400, but the auction brought $76,008. After the county satisfied the tax debt, a surplus remained over the amount owed.

The family argued that the Fifth Amendment's Takings Clause entitled them to compensation measured by the home's fair market value, not the lower figure produced by the auction. They separately argued that the county's retention of value violated the Eighth Amendment's Excessive Fines Clause. On June 23, 2026, the Supreme Court rejected both arguments in Pung v. Isabella County, No. 25-95, 609 U.S. ___ (2026).

Justice Alito delivered the opinion of the Court. According to the syllabus, he was joined by Chief Justice Roberts and Justices Sotomayor, Kagan, Gorsuch, Kavanaugh, Barrett, and Jackson, and joined by Justice Thomas except as to Part II-B. The holding on the just-compensation question was therefore unanimous.

The Court held that the constitutional baseline for measuring just compensation in this setting is the auction sale price, not the property's hypothetical open-market value, at least when the sale is fairly conducted. Drawing on the long history of tax sales as a collection method, the Court reasoned that an owner whose property is seized and sold for a tax debt is entitled to the surplus sale proceeds, in the Court's words "nothing less, and nothing more." On the Eighth Amendment, the Court held that the Excessive Fines Clause does not require the government to return more than the surplus proceeds after the sale.

The Court did not end the litigation. It vacated the judgment of the Sixth Circuit and remanded. The family had raised a separate contention that the procedure the county followed in seizing and selling the property was unfair. The Court declined to resolve that question and left it for the Sixth Circuit to address on remand if the arguments were properly preserved. That procedural-fairness question is unresolved.

What the Law Actually Says

The Fifth Amendment provides that private property shall not "be taken for public use, without just compensation." The familiar measure of just compensation in a standard taking is the property's fair market value. Pung addresses a narrower setting: what an owner is owed when the government seizes and sells a home specifically to collect an unpaid tax debt.

The starting point is Tyler v. Hennepin County, 598 U.S. 631 (2023). In Tyler, the Court held that a taxpayer states a Takings Clause claim when the government keeps the excess value of property seized and sold for taxes, the surplus over the debt owed. Hennepin County, Minnesota had sold a condominium to satisfy roughly $15,000 in taxes, interest, and penalties, then retained the entire proceeds. The Court held the county could not pocket the surplus. Tyler is often described as the "home equity theft" decision because it stopped governments from keeping value beyond the tax debt.

Tyler established that a surplus must be returned. It did not decide how to measure that surplus when the property sells at auction for less than its assessed or market value. Pung answers that question. The Court held that the surplus is computed from the actual auction sale price, not from a higher hypothetical fair market value, when the sale is fairly conducted. In practical terms, the owner receives the difference between what the property fetched at auction and the tax debt satisfied, and no more.

This rule operates against a patchwork of state tax-foreclosure regimes. States vary in how they conduct sales, calculate debts, and distribute any surplus, and several revised their statutes after Tyler. The federal constitutional floor set in Pung tells those systems that returning the auction surplus satisfies the Takings Clause; it does not require states to guarantee owners the full market value of a foreclosed home. For readers tracking Michigan property and possession rules generally, see our coverage of Michigan landlord-tenant laws and the landlord-tenant law hub.

Analysis: Why This Matters

The following is analysis from the Recording Law Editorial Team.

Pung narrows the practical value of Tyler without overruling it. Tyler told governments they cannot keep the surplus. Pung tells owners how that surplus is measured, and the answer favors the auction figure. Because foreclosure auctions often clear well below assessed or appraised value, as the $76,008 sale of a home assessed at $194,400 illustrates, the gap between "you keep your surplus" and "you recover your equity" can be large. An owner can prevail on the principle from Tyler and still recover far less than the home's apparent worth.

The decision rests heavily on history. The Court grounded the auction-price baseline in the long-settled practice of tax sales, treating the surplus-return rule as the historical norm rather than a fair-market-value guarantee. That framing matters for litigants in related disputes: arguments rooted in the historical treatment of tax collection carried the day, while a more abstract market-value theory did not.

The Eighth Amendment holding is also worth marking. By concluding that the Excessive Fines Clause does not require returning more than the surplus, the Court closed a second route owners had hoped to use to reach fair market value. After Pung, the Excessive Fines Clause is not a vehicle to recover the difference between auction price and market value in a fairly conducted tax sale.

The most consequential feature for future cases may be what the Court did not decide. By vacating and remanding the procedural-fairness question, the Court left open whether the manner in which a county conducts a seizure and sale can independently violate constitutional limits. The phrase "at least when the sale is fairly conducted" recurs in the holding, and the Court expressly declined to resolve the family's contention that this particular sale was not fair. We are not predicting how the Sixth Circuit will rule on remand. We note only that the fairness of the sale process is now the live battleground, and the Court's qualifier signals that an unfairly conducted sale could be analyzed differently.

How This Affects You

Homeowners behind on property taxes generally face a process that varies by state, but the federal constitutional floor is now clearer. If a government seizes and sells a home for unpaid taxes and a surplus remains after the debt is satisfied, the owner is entitled to that surplus. Under Pung, the surplus is measured from the auction sale price, so the recovery may be substantially less than the home's assessed or market value.

States vary in how they distribute surplus proceeds, the deadlines to claim them, and the notice owners receive before a sale. Several states changed their statutes after Tyler v. Hennepin County in 2023, and procedures continue to differ. The Pung decision does not standardize those state procedures; it sets the constitutional minimum for compensation and leaves the fairness of any particular sale process open for case-by-case challenge.

Because this story involves an unresolved remand and state-specific procedures, anyone facing a tax foreclosure should treat the surplus rules, claim deadlines, and notice requirements in their own state as the controlling details. For related property and possession topics, see our squatters rights and adverse possession hub, and for examples of how property-law disputes are moving in other states, see our reporting on the Arizona squatter law under SB 1426 and the Connecticut Fair Rent Commission eviction ruling.

This is general legal information, not legal advice. It covers the federal constitutional rule on just compensation after a property-tax foreclosure and reflects sources verified on June 24, 2026. Laws and procedures vary by state and this story is developing; consult a lawyer licensed in your jurisdiction about your specific situation.

Sources

• U.S. Supreme Court, Pung v. Isabella County, No. 25-95, slip opinion (June 23, 2026): https://www.supremecourt.gov/opinions/25pdf/25-95_dc8e.pdf
• Cornell Legal Information Institute, Pung v. Isabella County (No. 25-95): https://www.law.cornell.edu/supremecourt/text/25-95
• U.S. Supreme Court, Tyler v. Hennepin County, 598 U.S. 631 (2023): https://www.supremecourt.gov/opinions/22pdf/22-166_8n59.pdf
• SCOTUSblog case page and analysis, Pung v. Isabella County: https://www.scotusblog.com/cases/pung-v-isabella-county-michigan/

Related articles

• Michigan squatters rights laws
• Squatters rights and adverse possession hub
• Michigan landlord-tenant laws
• Landlord-tenant law hub
• Arizona squatter law under SB 1426
• Connecticut Fair Rent Commission eviction ruling

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Last updated: 2026-06-24. This is a developing story; details verified as of 2026-06-24.

Frequently Asked Questions

What did Pung v. Isabella County decide?

On June 23, 2026, the U.S. Supreme Court held unanimously that after a fairly conducted property-tax foreclosure sale, the just compensation owed to the former owner is the surplus from the auction sale price, not the property's higher fair market value. The Court also held the Eighth Amendment Excessive Fines Clause does not require returning more than the surplus.

Can I get my equity back after a tax foreclosure?

Under Tyler v. Hennepin County (2023) and Pung v. Isabella County (2026), the government generally must return the surplus left after your tax debt is satisfied. But Pung measures that surplus from the auction sale price, which is often lower than market value, so the amount you recover may be well below the home's assessed worth. State procedures and deadlines vary.

Is fair market value the measure of just compensation in a tax sale?

No. The Court held that the constitutional baseline for just compensation after a property-tax foreclosure is the auction sale price, not the property's hypothetical fair market value, at least when the sale is fairly conducted.

How much did the Pung home sell for compared to its value?

The Pung family owed $2,241.93 in property taxes. Isabella County, Michigan foreclosed and sold the home, which was tax-assessed at $194,400, for $76,008 at public auction. The Court held the family is entitled to the surplus from that $76,008 sale, not the assessed value.

Does the Eighth Amendment require the government to return more than the surplus?

No. The Court held the Excessive Fines Clause does not require the government to return more than the surplus proceeds after a fairly conducted tax sale.

What did the Court send back to the lower court?

The Court vacated the Sixth Circuit's judgment and remanded the family's separate contention that the county's seizure-and-sale procedure was unfair. That procedural-fairness question was not resolved and may be addressed on remand.

How does Pung relate to Tyler v. Hennepin County?

Tyler v. Hennepin County (2023) held the government cannot keep the surplus equity after selling property for taxes. Pung is a sequel that decides how the surplus is measured, holding it is calculated from the auction sale price rather than the property's market value.

Does this ruling change my state's tax-foreclosure process?

Pung sets a federal constitutional floor for compensation; it does not standardize state procedures. States vary in how they conduct sales, calculate debts, distribute surplus, and provide notice, and many revised their laws after Tyler. Check the rules in your own state.