Supreme Court Rules Tax Sale Owners Get the Surplus, Not Market Value: What Pung Means for Homeowners Behind on Property Taxes

On June 23, 2026, the U.S. Supreme Court decided Pung v. Isabella County, a case about how much a homeowner is owed after the government sells a home to collect unpaid property taxes ¹. The Court held that the measure of “just compensation” after a fairly conducted tax sale is the price the property brought at auction, not its hypothetical fair market value ¹. For families who have fallen behind on property taxes, the ruling is a reminder that waiting until a tax sale usually means losing much of the home’s equity.

What happened to the Pung family

The Pung family owed $2,241.93 in real property taxes, and local tax authorities in Isabella County, Michigan, foreclosed and sold the home at public auction ¹. The home had been assessed at $194,400 for tax purposes, but it sold for $76,008 ¹. Michael Pung sued in federal court, and the district court ruled that he was entitled only to the surplus, meaning the difference between the sale price and the tax debt, rather than the home’s fair market value ¹. The Sixth Circuit affirmed ¹.

Pung argued that the Fifth Amendment’s Takings Clause required the county to pay him the gap between the home’s value and the auction price, and that keeping that gap amounted to an excessive fine under the Eighth Amendment ¹².

What the Supreme Court decided

The case built on Tyler v. Hennepin County, a 2023 decision holding that the government must return any surplus proceeds from a tax foreclosure sale ¹. Pung asked the Court to go further. In an opinion by Justice Alito, the Court declined ¹.

The Court explained that for hundreds of years, English and American law have allowed property to be seized and sold to collect taxes, provided the government returns any surplus to the owner ¹. Fair market value was not the right measure, the Court said, in part because owners can generally avoid tax sales ¹. As SCOTUSblog summarized the opinion, an owner who believes the property is worth more than the taxes owed may be able to refinance, borrow against the property or sell it before foreclosure, pay the tax debt and keep the rest ². The Court also rejected the Excessive Fines Clause argument ¹.

The Court did not resolve Pung’s newer arguments that the procedure the county used was unfair, and it left those for the Sixth Circuit on remand ¹. Justice Sotomayor, joined by Justices Gorsuch and Jackson, wrote a concurrence, and Justice Thomas, joined in part by Justice Gorsuch, concurred in part and in the judgment ¹. Justice Thomas noted that the auction brought less than half of the home’s assessed value and less than half of what it later sold for on the market ¹.

What it means for South Florida homeowners

The practical lesson is about timing. Under Pung, a former owner’s constitutional protection after a fair tax sale is the right to the surplus, and auction prices can fall far below what a home would bring in an ordinary sale ¹². In the Pung case, a tax debt of about $2,200 led to the loss of a home assessed at about $194,000 ².

Florida has its own tax certificate and tax deed system, and the details, deadlines and notices differ from Michigan’s. The broader point still applies to anyone in Miami-Dade, Broward or Palm Beach County who has unpaid property taxes:

• Do not ignore tax notices. The Court stressed that owners usually have time and options before a sale ¹. Those options shrink as the process moves forward.
• Look at the whole budget. Property tax arrears often show up alongside mortgage, credit card or medical debt. Solving one bill while the others grow rarely works.
• Ask about alternatives early. Refinancing, a sale on the owner’s terms or a structured legal option can protect far more equity than a surplus check after auction ².
• Watch the mail after a sale. If a sale does happen, claiming any surplus on time matters, because that surplus is what the Constitution protects ¹.

For some households, a bankruptcy filing is one of the structured options worth evaluating, particularly when tax arrears are one part of a larger debt problem. Whether it fits depends on income, the type of debt and the equity at stake, which is why early advice matters more than any single rule.

Homeowners in South Florida who are behind on property taxes or other debts can request a confidential consultation with The Roca Law Firm, in English or Spanish, to review their options before a sale date is set.