AARP, one of the influential groups involved in the Supreme Court case, said older Americans could be particularly at risk of losing the equity they have spent a lifetime building.
One of our initiatives to support elderly people staying at home
The city of Atlanta has officially announced an initiative to help seniors remain in their homes despite rising property taxes.
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WASHINGTON – A Michigan family lost their ranch-style home to cover $2,242 in disputed unpaid taxes.
the government sold the place for the song − It went for $76,008 at public auction, but the buyer sold it for $195,000.
A 2023 Supreme Court ruling required Isabella County to give the remaining property to Michael Pun’s family after selling the home and settling taxes, but his lawyers argue in a lawsuit to be heard in court on Feb. 25 that that’s not enough. They point to the appraised value of the foreclosed home at nearly $200,000 and argue that compensation should be based on its fair market value.
Lawyers for the family say the government has no reason to sell the property for more than the unpaid taxes unless the high court intervenes.
“They don’t care because they’re not allowed to keep anything else anymore,” attorney Philip L. Ellison said at a press conference about the lawsuit by the Pacific Law Foundation, which is representing the families.
A libertarian public interest law firm last challenged the so-called “stock theft” case before the Supreme Court after a 94-year-old Minnesota grandmother lost her property to foreclosure.
“Taxpayers must give back to Caesar what is Caesar’s, but no more,” Chief Justice John Roberts wrote, siding with the grandmother in the court’s unanimous decision.
But the ruling does not address whether the state can sell the property for far less than its actual value.
AARP: “Amazingly Low” Sale Prices
AARP called the county’s purchase price for the Puns’ home “stunningly low.”
The advocacy group filed a brief in support of the challenge, citing concerns that older Americans are particularly vulnerable to tax liens and also cited a 2011 tax lien auction in Poughkeepsie, New York.
According to AARP, a company paid $4,825 for the home of a widow who was unable to pay $4,242 in taxes due to dementia. Even though she had the money. The home was appraised at $132,000 and the buyer later sold it for $115,000.
Starting in 2023, some states, including Oregon, Massachusetts and Maine, will require foreclosed homes to first be sold at fair market value by real estate agents.
AARP argued this shows there are alternatives to fire sale auctions that allow the government to collect unpaid money and homeowners to keep most of their home’s value.
The U.S. Chamber of Commerce, another powerful interest group, is involved as well.
“Governments are incentivized to sell quickly and cheaply, often resulting in devastating losses for property owners,” the industry group said in a filing.
The main legal issue in the case is the Fifth Amendment’s Expropriation Clause, which prohibits the government from taking private property “without just compensation.” The Puns also argue that selling the property for a fraction of its value to cover taxes is an excessive penalty under the Eighth Amendment.
What is the “fair market value” of a foreclosed home?
Isabella County attorneys said the government’s requirement that compensation be based on the property’s fair market value ignores the fundamental difference between a market sale with a willing seller and buyer and a forced sale through foreclosure.
The county said in its filing that properties in foreclosure simply have a lower value.
“The Constitution does not give delinquent taxpayers the right to seek a hypothetical pre-foreclosure appraisal rather than the actual sale proceeds,” Michigan and 10 other states said in a brief supporting Isabella County.
Hennepin County, the municipality at the center of Minnesota’s 2023 lawsuit, said properties it recently sold through an online public auction sold for about 40% of their estimated market value.
The Wisconsin Association of Counties told the court that the state has already taken steps to comply with the court’s decision in 2023 and that further changes “will likely require a complete re-evaluation of Wisconsin’s tax lien laws.”
The nation was doing “a lot of bad things”
According to the Pacific Legal Foundation, nearly all states changed their laws after the 2023 Supreme Court ruling.
“A lot of states did bad things,” said Christina Martin, a lawyer for the foundation who defended the case. “In most states, people are better off than they were before.”
However, a liberal public interest law firm recently announced that it has identified ways in which the states of Alabama, Arizona, Michigan, New Jersey, and New York are engaging in “shadow stock theft.” These include requiring property owners to submit claims to the government for excess proceeds from tax sales. Homeowners may be required to make that request even before the property is sold, which may shorten the deadline for filing a claim.
In recent months, the Pacific Law Foundation has asked the Supreme Court to intervene in several Michigan cases involving such “bureaucratic trappings.”
Courts have so far declined to hear such appeals.
In the Isabella County case over fair market value, which the court will hear on Feb. 25, the Department of Justice argues that property owners can challenge whether they received insufficient notice of sale or were not given an opportunity to bid. But the department said that’s all the Constitution requires if the sale was conducted fairly and the homeowner received any surplus money.
“The best measure of a property’s value is the price it receives at the foreclosure sale itself, as long as the sale is conducted fairly,” the Justice Department said in a filing previewing arguments it plans to make during oral arguments. “Like other debtors, taxpayers who wish to avoid foreclosure proceedings can also pay their outstanding debts.”
