June 24, 2026

In a unanimous decision, the United States Supreme Court held that property owners are not entitled to recover a property’s hypothetical fair market value following a tax foreclosure sale. In Pung v. Isabella County, the Court considered a dispute involving the amount of compensation owed after a Michigan tax foreclosure auction. The case arose after a Michigan family’s home sold at a tax foreclosure auction for approximately $76,000 to satisfy an $8,400 tax debt. The family argued that they were entitled to compensation based on the property’s alleged fair market value of approximately $194,000 rather than the auction sale price. The Court held that property owners are not entitled to recover a property’s hypothetical fair market value following a tax foreclosure sale and stated that the traditional rule permits recovery of the difference between the auction sale price and the unpaid taxes owed.

Justice Samuel Alito, writing for the Court, stated that people are not entitled to recover a property’s “hypothetical fair market value” when a home is sold at auction to satisfy unpaid taxes. The Court held that the traditional rule permits recovery of the difference between the auction sale price and the unpaid taxes owed. The Court remanded the case for further proceedings on other issues. For lenders, servicers, investors, and foreclosure practitioners, the decision provides additional guidance regarding compensation claims arising from tax foreclosure sales under the Takings Clause.