Supreme Court Rules Michigan Family Owed Only Auction Price, Not Market Value, After Home Seized Over $2,242 Tax Debt

A Michigan family that lost its home over a $2,242 unpaid tax bill just found out the Constitution doesn't guarantee them what the house was actually worth. It guarantees them whatever the government's auction happened to fetch.

The Supreme Court ruled June 23, 2026, in Pung v. Isabella County that when local officials seize and sell a home for delinquent property taxes, "just compensation" under the Fifth Amendment is measured by the actual auction sale price, not a hypothetical market value. Writing for the majority, Justice Samuel Alito said the standard applies as long as the tax sale itself was conducted fairly.

The Court vacated the Sixth Circuit's judgment and sent the case back down for further proceedings.

How a $2,242 bill turned into a lost house

Scott Pung bought the three-bedroom ranch home in Union Township, Isabella County, in 1991 for $125,000. It was the family's primary residence. After Scott Pung died in 2004, his wife Donnamarie lived there. After she died in 2008, their son Marc and his family stayed in the house, with ownership sitting in Scott Pung's estate.

In 2010, the local tax assessor stripped the home's primary-residence exemption, claiming the family never filed an updated affidavit proving it was still their main home. That meant the county taxed the property at the higher second-home rate for tax years 2007 through 2011.

The family fought the reassessment at the Michigan Tax Tribunal and won. The tribunal ruled they didn't owe the second-home tax rate. But even after that win, the estate still faced a real-property tax balance of $2,241.93, according to court records cited by both Times of India and Inkl.

Isabella County began foreclosure proceedings over that balance. A Michigan trial court initially blocked the foreclosure, but the Michigan Court of Appeals let it move forward. The county followed the notice, redemption-period, and court-judgment steps required under the Michigan General Property Tax Act, then put the house up for public auction.

Tax records had the home assessed at $194,400. The winning bid at the county auction: $76,008. The investor who bought it turned around and sold it on the open market for $195,000, nearly matching the assessed value, in less than 18 months. Isabella County, for its part, initially kept the full $76,008 in auction proceeds.

Michael Pung, representing the estate, sued the county in federal court, arguing that keeping the home's value beyond the tax debt violated the Takings Clause.

What the ruling actually settles, and what it doesn't

The Supreme Court didn't say the county can keep everything. It said the family is owed the surplus, the difference between what the tax debt was and what the auction actually generated, not the gap between the tax debt and the home's true market value.

That distinction matters enormously here. If compensation were pegged to the $194,400 assessed value or the $195,000 resale price, the estate would be owed roughly $192,000 to $193,000. Pegged instead to the $76,008 auction price, the surplus shrinks to somewhere around $73,766, before whatever additional fees or interest the county deducts.

A reasonable objection to this outcome: pegging compensation to a government-run auction that fetched barely 39% of assessed value effectively lets counties structure sales however they want and cap what they owe former owners to whatever that sale brings in, even when a flip days or months later shows the true value was far higher. Critics of tax-foreclosure practices have long argued this dynamic lets investors and governments split the difference on other people's home equity.

The counterargument, reflected in Alito's opinion, is that the Fifth Amendment requires compensation for what was actually taken through a fair, legally compliant process, not a guarantee that every government auction will match private market conditions. Michigan followed its statutory foreclosure procedure step by step, including notice and a redemption window, before the sale went forward.

The ruling builds on the Supreme Court's 2023 decision in Tyler v. Hennepin County, which held it's unconstitutional for governments to keep the entire surplus from a tax-foreclosure sale beyond the tax debt owed. Pung narrows how that surplus gets calculated, tying it to the sale price rather than assessed or resale value.

With the case remanded, lower courts must now determine exactly what surplus, if any, Isabella County owes the Pung estate. The broader question the ruling leaves open nationwide: what stops a county from running a thin, poorly marketed auction that depresses the sale price, then pointing to that same low price as the ceiling on what a family is owed.