The Supreme Court Just Ruled: Losing Six Figures in Equity Over a Few Thousand in Back Taxes Can Be Legal

If you're behind on property taxes right now, this should get your attention — not because you did something wrong, but because the Supreme Court just confirmed that being wronged and being repaid are two different things, and the gap between them is measured in years and legal fees you may not have.

If you're not behind, read this anyway. Every family in this article thought that too, right up until they weren't. A disputed assessment. A parent's death that leaves a bill in someone else's name. A hospital stay that eats a fixed income for six months. None of it takes recklessness — just timing you don't control.

The Court didn't say the county was right to take the home. It said the auction price is the baseline for what a homeowner is owed, and in a separate opinion, Justice Sotomayor confirmed the Court was not "identifying the contours of a fair auction" — that's left for the next family to litigate. This isn't a story about one unlucky homeowner in Michigan. The mechanism this ruling confirms applies to any homeowner behind on property taxes, in any state without stronger protections, regardless of income, age, or how the debt arose.

What Actually Happened to the Pung Family?

In 1991, Scott Pung bought a three-bedroom ranch home on half an acre in Union Township, Michigan, for $125,000. It was the family's primary residence, so they received the standard exemption Michigan gives owner-occupied homes. When Scott died in 2004, his wife Donnamarie continued living there; when she died in 2008, their son Marc and his family stayed on. The home remained in the family estate, and per the Supreme Court's opinion, they paid every tax bill in full.

In 2010 — after the home had been the family's primary residence for 19 years — the local tax assessor decided the Pungs no longer qualified for the exemption and retroactively billed them at the higher "second home" rate for 2007 through 2011, incorrectly believing the heirs were required to refile paperwork. The family fought it at the Michigan Tax Tribunal — and won. The tribunal confirmed they owed nothing beyond what they'd already paid.

The assessor didn't accept that. "I don't care what he says," she said of the judge who ruled for the Pungs — her words, quoted in the Supreme Court record. She then imposed the same second-home tax again for 2012, in a bill that would eventually grow to $2,241.93 with penalties and interest. Justice Thomas, reviewing the record years later, put it bluntly: "Even a decade later, before this Court, the County could not substantiate a legitimate basis for imposing this tax." When the county's own attorney was asked at oral argument, he answered: "I don't know what the township assessor's reasoning was."

It gets worse. The extra tax wasn't even on the original 2012 bill. The estate's executor, Michael Pung, went to the township office with a check and paid the full amount printed on his bill — the disputed add-on, imposed afterward, is apparently the only "unpaid" tax in the family's history. The Michigan Court of Appeals later affirmed that the Pungs didn't owe it. The county foreclosed anyway, and in June 2018, the family permanently lost title to a home they had owned for 27 years.

Then the county sold it. Here are the numbers, straight from the Supreme Court's opinion:

That resale number is the one that matters most. The home didn't gain value between the foreclosure auction and the resale — it was the same house, sold twice, less than eighteen months apart. In the Supreme Court's words, the new owner sold it on the open market for "$195,000, almost exactly its earlier assessed value." The only thing that changed was who owned it. The roughly $119,000 difference between the auction price and what the home was actually worth didn't disappear — it went to the auction buyer as profit for holding a house a year and a half.

The county initially kept all of the sale proceeds. A federal court later ordered it to return $73,766 in surplus. Justice Thomas did the math: "even if the tax were proper — which it was not — the Pungs lost about $118,000 as a result of a supposed debt of $2,242."

What Did the Supreme Court Decide — and What Did It Admit It Didn't?

The Court held that the proper baseline for "just compensation" after a tax foreclosure is the auction price, not the home's hypothetical fair market value — "at least when the sale is fairly conducted in light of our country's history of tax sales." It then vacated the lower court's ruling and remanded the case specifically so the courts below can decide whether Isabella County's process met that standard.

Justice Sotomayor, in a separate opinion, said the quiet part directly: she does not read the Court's opinion as "identifying the contours of a fair auction, or endorsing the parties' or the United States' articulations of what this standard requires." Those issues, she wrote, are correctly left for remand.

Read that plainly: there is currently no binding legal definition, anywhere, of what makes a tax auction "fair." Justice Thomas, joined in part by Justice Gorsuch, offered his own view — that historical practice required governments to try seizing personal property before taking an entire home, and he closed his opinion with this: "What Isabella County did to the Pungs was wrong, and, on my initial view, likely unconstitutional." But that's a separate opinion, not binding law. No county in the country is required to follow it. The battle over "fair" starts now, one courtroom at a time — with the Pung family, years and multiple courts deep, still fighting.

Is This New? No — It's a Pattern

Tyler v. Hennepin County (Supreme Court, 2023)

Geraldine Tyler, 94, fell behind on property taxes after moving into a senior community — a $2,300 debt that grew to $15,000 with interest and penalties. Hennepin County, Minnesota, seized her condo, sold it for $40,000, and kept the entire $25,000 above her debt, under a state law that simply defined her ownership interest out of existence once she fell delinquent. The Supreme Court ruled unanimously that this violated the Takings Clause. Chief Justice Roberts: "The taxpayer must render unto Caesar what is Caesar's, but no more." It took a Supreme Court case to establish that basic principle.

Rafaeli v. Oakland County (Michigan Supreme Court, 2020)

A Michigan property owner underpaid his taxes by $8.41 in 2011. With interest and fees, the debt grew to $285.81. Oakland County foreclosed, auctioned the property for $24,500, and — following Michigan law at the time — kept everything above the debt. Michigan's highest court forced the county to return the surplus under the state constitution. A co-plaintiff in the same case owed about $6,000; the county had sold his property for $82,000 and kept it all.

Two courts, six years apart, two different legal paths — and the same repeating fact pattern: a small, often disputed debt; a government that keeps money it isn't owed; and a homeowner who only gets it back after years of litigation most people can't access.

Pacific Legal Foundation's research found that between 2014 and 2021, roughly 8,600 homes and more than $780 million in equity were taken this way across about a dozen states. Tyler, Rafaeli, and the Pungs are the exceptions — the ones who found lawyers willing to work for free and had the years it takes to fight. Even some of the legal "fixes" passed after Tyler require the homeowner to affirmatively claim the surplus within a limited window; miss the deadline, and the money stays with the government by default. The right to your equity is real on paper and largely inaccessible in practice — and Pung just confirmed that the standard protecting you from a lowball auction doesn't yet exist as binding law.

Where Does Colorado Actually Stand?

Colorado is not currently a state where the government can keep 100% of a foreclosed homeowner's equity. After Tyler, Colorado passed House Bill 24-1056 (effective July 1, 2024), which rebuilt the treasurer's deed process: a deed is no longer issued automatically to whoever holds the tax lien. Instead, the deed option is sold at a public auction, with notice requirements at multiple stages, and surplus proceeds above the debt go to the homeowner. That's a real, meaningful protection most states didn't have before 2023.

What Pung means here is narrower but still consequential: if your home is ever sold out from under you for unpaid taxes, the size of whatever surplus you're owed is now measured against the auction price — which tends to run well below market value — not your home's actual worth, unless you can prove in court that the process was specifically unfair. The Pung home sold at auction for under 40% of its assessed value. By the letter of this ruling, a price like that is presumptively "compensation" until someone litigates otherwise.

Nothing about this is limited to homeowners who mismanage their finances. The Pungs' debt was disputed and never justified. Rafaeli's was a rounding error. Tyler fell behind while moving into elder care. A disputed assessment, a missed notice, a family member's death that disrupts who's handling the mail, an illness that eats a fixed income — any of these can start the clock. And Colorado Springs has a larger share than most cities of people living on fixed or irregular income: military families who relocate frequently and can inherit a home's tax history mid-move, retirees watching property taxes climb faster than Social Security, self-employed people whose income swings year to year. None of that makes anyone careless. It just means more people here are one disputed bill or one bad year away from finding out how this actually works.

What Can You Actually Do About It?

First, the disclaimers, because they matter: I'm not an attorney and I'm not a financial advisor — nothing here is legal or financial advice, and if you're facing foreclosure you should talk to a lawyer. I'm also not going to pretend there's a loan or refinancing trick that fixes a tax bill someone genuinely can't pay. What I can tell you, as a real estate agent, is the practical difference between acting before a tax foreclosure and being on the wrong side of the mechanism described above:

• Before foreclosure, you control the timing, the marketing, and the price. You are not dependent on a court someday agreeing your auction wasn't "fair."
• After foreclosure, your only path to full value is proving unfairness in a legal process most people can't afford to run — the exact process that took the Pungs, Tyler, and Rafaeli years each.

If you're behind on property taxes — or worried you might fall behind:

1. Confirm exactly where you stand. Contact the El Paso County Treasurer and Assessor now and get the county's own numbers in writing. Ask about payment options. This takes 30 minutes and costs nothing.
2. If the assessment itself is wrong, fight it. The Pung family challenged their tax and won — twice. Pacific Legal Foundation reviews home equity theft cases for free and has litigated these fights all the way up, including this one.
3. If a sale looks likely, move before a notice arrives. Selling on the open market means professional marketing, real buyers, and fair market value — you pay what's owed and keep the rest. Once foreclosure starts, you're no longer choosing whether to rely on the system working. You're finding out whether it will.