Tax lien sales, which involve the foreclosure and auction of properties whose owners have been found delinquent on outstanding taxes, are a seldom-discussed component of the national housing market. While they don’t have the same impact as the construction of new homes, tax lien sales have their own part to play in contributing to housing inventory.
That part could very well have taken on a radically different shape if the outcome of Pung v. Isabella County, a civil case concerning excess equity and tax foreclosure sale practices, had gone a different way. The U.S. Supreme Court made a ruling on that case on June 23.
The highest court in the land heard oral opening arguments for the case on Feb. 25 and was then tasked with deliberating the case’s operative question: whether the Fifth Amendment’s takings clause demands compensation based on the fair market value of the property rather than simple auction surplus. Additionally, the case stood to address whether losing significant home equity in a foreclosure sale situation constitutes an “excessive fine” under the Eighth Amendment.
The court’s review of Pung v. Isabella County came relatively close on the heels of Tyler v. Hennepin County, another landmark ruling on excess equity that set a strong precedent against government forfeiture beyond what is owed in taxes.
Since the Tyler ruling, many states have passed laws protecting the rights of homeowners to keep the excess equity of their former properties following foreclosure sales and payment of tax debts. This sea change in tax lien practices across the country – while substantial – could have paled in comparison to the potential implications of a Pung ruling, however.
Read the rest of this story in the 2026 Housing Inventory Solutions report.
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