A tax sale is supposed to collect a debt. For a long time, in a lot of states, it did more than that — it kept the change. You owe the county a few thousand dollars, the county sells the property for far more, and instead of taking what it’s owed and returning the rest, it keeps the whole amount. In May 2023 the U.S. Supreme Court looked at that arrangement and, without a single dissent, called it what it is: taking property without paying for it.
If you buy at tax sales, this is not background noise. It is the ground moving under the entire asset class.
The $25,000 that started it
Geraldine Tyler was 94. She owed her county in Minnesota a property-tax debt that had grown, with penalties and interest, to around $15,000. The county foreclosed, sold her condo for about $40,000, and kept all of it — the roughly $25,000 above the debt included.
In Tyler v. Hennepin County, the Court held that keeping that surplus is a taking under the Fifth Amendment. The debt was the county’s to collect; the equity above it was still hers. The decision was unanimous. Overnight, every state that let governments pocket surplus equity after a tax foreclosure had an unconstitutional statute on its books.
Why a buyer should care, not just a homeowner
It’s easy to read that as a homeowner-protection story. It’s also a heads-up for anyone who buys at these sales, for three reasons.
The rules are being rewritten while you bid. States that ran on the keep-the-surplus model are rebuilding their procedures — new notice requirements, new sale mechanics, new ways the money gets split afterward. Procedures you learned two years ago may not be the procedures that govern the next sale.
Part of some “bargains” was never the seller’s to sell. In a keep-the-surplus state, a deed that looked like a steal was sometimes cheap precisely because it carried away equity that belonged to the former owner. Post-Tyler, that money is spoken for. The discount that came from it is going away.
The mechanics that produced windfalls are the ones disappearing. The reforms don’t just add paperwork; they route the surplus back to the former owner and, in some states, move the sale itself toward a normal market listing. Both changes compress the gap a buyer used to capture.
Maine: what the new regime looks like
Maine is a clean example of how different “reformed” can look. It never ran California-style auctions to begin with. Unpaid taxes become a lien; if the lien isn’t cleared within 18 months, it forecloses automatically and the town simply owns the property. No investor auction, no opening bid.
What the town does next is where Tyler landed. Under Maine’s amended law, a municipality that sells tax-acquired property generally has to list it through a licensed broker at the highest reasonable price, give the former owner 90 days’ notice, and return the surplus — the sale price minus the back taxes, interest, and the costs of the sale — to that former owner. The below-market deed, in other words, is mostly designed out of the system.
That’s why Maine isn’t a place this kind of screening tool helps you: there’s no consolidated list and, increasingly, no windfall to screen for. It’s a useful contrast, not a target.
Where California already stood
California is worth naming because it was ahead of this. When a California tax sale brings in more than the taxes and costs owed, the excess proceeds don’t vanish into the county’s general fund — the county holds them, and “parties of interest,” including the former owner and certain lienholders, can file to claim that surplus, generally within a year of the sale.
So California buyers were never really operating in a Minnesota-style equity-theft system. But the lesson still applies: know your state’s regime before you assume the spread you see is yours to keep, and understand that a former owner may have a live claim to money a sale generates.
The part that survives every reform
Strip out the legal specifics and the takeaway for a buyer is simple. The durable edge at these sales was never the loophole — it was not overpaying for junk. Reform after reform can close the surplus windfall, change who gets the leftover money, and turn a sealed bid into a broker listing. None of it changes the parcel that has no legal access, the “lot” that’s a line on a 1960s map, or the desert square whose opening bid is mostly flat per-parcel charges that never had anything to do with the land. Sorting those out is the work that still pays, in every state, before and after Tyler.
That’s the only kind of edge worth building on: the one the next statute can’t take away.
If you want the next California sale read this way — the parcels, the flags, the sources, before bidding opens — leave your email and we’ll tell you the day the list drops.
This is general information, not legal advice, and tax-sale law is changing fast and differs by state — verify the current statute and your county’s procedure, and talk to a lawyer before you rely on any of it. We are not attorneys.
Sources
- Tyler v. Hennepin County, 598 U.S. 631 (2023) — the Supreme Court opinion; see also the Cornell LII case page.
- Maine 36 M.R.S. §943 — tax lien mortgage and the 18-month automatic foreclosure.
- Maine 36 M.R.S. §943-C — sale of foreclosed property: former-owner notice, broker sale, and return of surplus.
- Cal. Rev. & Tax. Code §4674 (and §4675) — excess proceeds and claims by parties of interest.