Pung v. Isabella County

When homeowners fall behind on property taxes, counties sell the debt to investors at auction. The investor earns statutory interest (8-18%) if the owner pays back taxes during the redemption period (6 months to 3 years). If the owner doesn't redeem, the investor can foreclose. The market is $5.02B annually with 95%+ redemption rates, dominated by institutional players like Fortress Investment Group.

In 2023, the Supreme Court unanimously ruled that counties cannot keep "surplus equity" (home value above tax debt) after tax sales. Geraldine Tyler owed $15,000 in taxes; her condo sold for $40,000; Hennepin County kept the $25,000 surplus. SCOTUS ruled this was an unconstitutional "taking" under the Fifth Amendment. The county had to return surplus equity to Tyler.

After Tyler, the question became: How do we calculate "fair market value" to determine surplus? Michael Pung (administrator of Timothy Scott Pung's estate) argues his family's property had an appraised FMV of ~$194,400 but sold at auction for $76,000. Isabella County returned $73,767 (auction price minus the $2,242 tax debt). The Pungs argue FMV should be the appraisal (~$194,400), not the auction price, creating a ~$118,000 "Pung Gap" in constitutional liability. If SCOTUS agrees, industry liability could be significant.

Claimants: Homeowners who lost property and may be owed surplus equity. Investors: Hedge funds (Fortress, Finch, Propel) hold billions in liens and could face massive liability. Counties: Run auctions and may be liable for past sales. Title Companies: Need to identify "Tyler clouds" on property titles before closing real estate sales. Law Firms: Represent claimants in surplus equity claims.