Homeowners are owed back foreclosure profits, Michigan high court rules

GRAND RAPIDS, Mich. (WOOD) — The Michigan Supreme Court has ruled that Michigan homeowners who lost their property due to unpaid property taxes prior to 2020 are entitled to the profits of the sale of their former home.

Before 2020, counties would keep all the profits from a property tax foreclosure sale, sometimes keeping tens of thousands of dollars more than what they were initially owed. But in 2020, the Michigan Supreme Court ruled that was unconstitutional and that the former property owner has a right to the surplus proceeds.

On Monday, the Michigan Supreme Court ruled that the 2020 decision is retroactive in its ruling on Matthew Schafer, et al. v. Kent County .

Schafer owed $5,300 on his property, according to county documents. The county foreclosed on his home in 2017 and sold it for $51,500. It kept the full amount of the proceeds. The home was worth close to $96,000, according to the Pacific Legal Foundation, which had attorneys represent Schafer.

After the 2020 decision from the Michigan Supreme Court, Schafer filed a class action lawsuit for the remainder of the money, but the county argued the 2020 decision didn’t apply to past cases.

Monday’s decision means Schafer and others who had their homes foreclosed on by the government prior to 2020 are entitled to those surplus funds.

“We are glad that the Michigan Supreme Court affirmed that government must pay just compensation when it takes more than what it is owed,” Christina Martin, senior attorney at Pacific Legal Foundation, said in a Monday release. “Now, local governments should return their ill-gotten gains to those who had their hard-earned equity stolen.”

News 8 reached out to the Michigan Association of County Treasurers seeking comment on the ruling late Monday afternoon but did not immediately hear back.

Earlier this month , a judge approved a class action-lawsuit settlement involving 43 counties that returns 80% of foreclosure surplus proceeds to claimants.

Tax foreclosure is a yearslong process. A new system enacted following the 2020 decision creates a way for people to get back the surplus proceeds. County treasurers say the process to get the money is as “simple as possible,” while attorneys say it’s “designed to fail.” Click here to read more.

For the latest news, weather, sports, and streaming video, head to WOODTV.com.