Thousands of former Michigan homeowners could claim profits of foreclosed property sales

Former property owners, whose homes were foreclosed and sold at auction, may be able to claim any profit the county made from those sales beyond the tax debt they owed.

Earlier this year, the Michigan Supreme Court clarified a previous ruling to say that owners can make a claim on leftover proceeds from tax foreclosure sales retroactively, so before 2020. It's an opinion that could hit county coffers and potentially affect tens of thousands of former property owners.

Now, former owners can make claims by filling out interest forms, depending on when sales took place. The deadline to make a claim for leftover money from tax foreclosures before Dec. 22, 2020 is March 31, 2025.

Tax foreclosure is the process by which homeowners lose their property because they didn't pay their property taxes for three years. The properties are then put up for sale at two public auctions in the fall.

Here is what to know:

What are foreclosure surplus proceeds?

Surplus proceeds from a foreclosure is money from the sale of a property minus the taxes and fees owed to the county. A Michigan Supreme Court 2020 decision held that former property owners have a right to proceeds from tax foreclosure sales.

Lawmakers later established rules for people with foreclosed properties to apply to receive proceeds beyond the property taxes they owed. A growing number of suits across the state also sought to recover the funds for property owners. But it was still unclear whether people with foreclosed property sold before the 2020 decision could get surplus proceeds, so the matter went back to the high court.

How much could former owners recover?

The Michigan Department of Treasury does not have a final assessment for how much counties across the state owe in surplus proceeds since it's typically a county-level issue. The Michigan Association of Counties does not currently have data from county treasurers statewide on how much former property owners could recoup from tax foreclosure sales before 2020 either.

The Wayne County Treasurer has not publicly stated how much could be owed to property owners.

In Detroit, about 2,400 previous homeowners may be able to recover leftover proceeds — totaling $20 million — from 2015 to 2019 tax foreclosure auctions, according to an analysis by Alex Alsup, vice president of research and development at the property data company Regrid. Alsup also created an online tool allowing former owners to search for a property address and learn whether there is a windfall profit. Alsup's analysis, an independent project outside of his work with Regrid, uses Detroit assessment records from 2015 to 2019 and Regrid's Wayne County tax foreclosure auction data. The online dashboard is meant to be a tool and does not guarantee the recovery of surplus proceeds, Alsup said. For that, former property owners must work with the counties or state to start the process to get the funds.

The Wayne County Treasurer's Office said in a statement that the number of taxpayers entitled to claim proceeds in Alsup's analysis is inaccurate. The Treasurer's Office did not offer its own estimate, citing that, as a policy, it does not comment on pending litigation. The exact litigation in question is unclear but Wayne County is a defendant in a class action lawsuit in federal court related to surplus proceeds. That matter went before the 6th Circuit U.S. Court of Appeals, according to a recent court filing.

"Our office has complied with the Supreme Court ruling and with what is required by law. We encourage all eligible claimants to visit our website and file their claim using the link to the form on our home page," the Wayne County Treasurer's Office said in a statement.

How do former owners file a claim?

There are essentially two ways to make a claim for surplus proceeds. One process is for sales before Dec. 22, 2020, and another is for after Dec. 22, 2020. Former owners must file these claims with foreclosing governmental units, which are counties in most cases.

Here's a general overview of how to start off the process in Wayne County, for instance:

• Before 2020: If a property was foreclosed and sold at auction between 2015 and 2020, former owners may be able to recoup proceeds by filling out a "notice of intent" form, according to the Wayne County Treasurer's Office website. The deadline is March 31, 2025, and the notarized form must be delivered by mail or in person, to the Wayne County Treasurer's Office.

• After 2020: Former property owners looking to make claims on leftover proceeds from foreclosure sales after December 2020 can complete and return a notarized form, via mail or in person, by July 1 the year of the foreclosure.

  
  

  Both forms note that completing the paperwork is evidence of an "intent to make a future claim but is not itself a claim for sales proceeds." That's essentially the first step.

  After filling and sending out the forms, the foreclosing governmental units will send out notices with information about whether there is any leftover money, if anyone else has made a claim, notification that the claimant has to file a motion and information on the circuit court where that motion must be filed, according to the nonprofit Michigan Legal Help, which is funded in part by the Michigan Supreme Court.

  Previous property owners must then file a motion in circuit court and go to a hearing before a judge before they can get any leftover dollars.

  For more detailed information and deadlines, go to the Wayne County Treasurer's Office website at bit.ly/WayneCountyTreasurersOffice, the Michigan Department of Treasury at bit.ly/MichiganTaxpayerResources and Michigan Legal Help bit.ly/MichiganLegalHelpSurplus.

  Contact Nushrat Rahman: nrahman@freepress.com. Follow her on X: @NushratR.