The Supreme Court Ended Home-Equity Theft. Then It Repriced the Loophole.

Every county in the country has the same tool for unpaid property taxes: seize the home, sell it, and take back the debt.▸ What happens to the money left over once the debt is paid is where the system splits. For decades, a dozen-odd states let the government or a private investor keep all of it — debt, interest, and the rest of the owner's equity. The 2023 case Tyler v. Hennepin County ended that outright: the Supreme Court ruled unanimously that a Minnesota county violated the Fifth Amendment when it sold Geraldine Tyler's $40,000 condo over a $15,000 tax debt and kept the $25,000 left over. Surplus, the Court said, belongs to the owner. Three years later, a second case asked what "surplus" is measured against — and on June 23, 2026, the Court answered in a way that leaves most of the old system standing.

Pung v. Isabella County began with a clerical fight the county lost twice.▸ A township tax assessor charged Michael Pung's family an extra $2,242 in "second home" taxes on a house they had lived in for 27 years — despite a Michigan tax tribunal and then a state appeals court both ruling the family didn't owe it. The county foreclosed anyway, telling the Court at oral argument it could not explain the assessor's reasoning. Title passed to Isabella County in 2018. The county's own tax rolls had valued the home at $194,400. At public auction, it sold for $76,008 — under 40% of that figure. The buyer held it for less than 18 months, then resold it on the open market for $195,000: almost exactly what the county's own assessors had said it was worth all along.

A unanimous Court vacated and remanded the case, rejecting the county's earlier position that it could keep everything.▸ But on the harder question — how much the family is owed — the Court sided with the county's arithmetic over the market's. Justice Alito's opinion held that "just compensation" after a tax sale is pegged to what a "fairly conducted" auction produces, not to the home's fair market value, so long as the sale follows the country's historical practice for tax auctions. Justice Thomas, writing separately, called the result what it was in dollar terms: the county's "payment of only $76,008" on a $194,400 home was "under 40% of its fair market value." He agreed to send the case back rather than end it there.

Tyler closed the most direct version of the practice: a government or investor keeping the entire sale price, debt and all.▸ It did not say how a state must price the sale that produces the "surplus" it must return. Pung answers that the auction price itself can be the yardstick — which matters because tax auctions are not open-market sales. Bidders are often the government's own contractors or specialized lien investors; notice periods are short; the property is sold "as-is," at a fixed date, to whoever shows up. Pacific Legal Foundation, the property-rights group that argued both cases, has documented the pattern nationally: from 2014 through 2021, in the nine jurisdictions — eight states and Washington, D.C. — where researchers could obtain usable county sale records, at least 8,500 homes were tax-foreclosed and sold under laws that let the government or an investor keep more than the debt. On more than 6,400 of those homes, researchers could compare the sale to the property's market value: homeowners lost $780 million above what they owed, an average of 86% of each owner's equity.

The gap between the bars is the mechanism Pung just blessed.▸ Governments are estimated to have pocketed about $34 million more than they were owed on roughly 2,800 homes; private tax-lien investors took roughly $260 million more than they were owed on about 3,400 homes. Together, that's $294 million in surplus actually captured as cash — a fraction of the $780 million in equity the same homeowners lost when measured against what their homes were actually worth. The difference is the Pung pattern at scale: a home worth $194,400 sold for $76,008, and the "surplus" returned to the owner was calculated from the smaller number. Pacific Legal Foundation counts 12 states plus D.C. with laws on the books permitting some version of equity retention — three more than the nine jurisdictions its researchers had usable records for, meaning $780 million is a floor, not a ceiling, on what the pre-Tyler system took.

Case figures are drawn from a single Supreme Court record (Pung v. Isabella County) and represent one household; national figures are a 2014–2021 study covering nine of at least twelve jurisdictions with equity-retention laws, so they understate, not overstate, the true national scope.