I must admit that since I have been hosting a Michigan based radio talk show there are not many things that I have not encountered during all these years of research and show prep.  I must also admit that I had no idea that the State of Michigan allowed our Counties to keep the profits that they generate off of foreclosed and seized properties.

The Michigan Capitol Confidential is reporting on what I would call state sponsored theft.  In the article they state:

 The Michigan Supreme Court will likely render a decision this year on whether Oakland County is violating the state constitution by keeping the profits from auctions of properties that have been foreclosed by local governments for unpaid property taxes. A related question is whether the county is violating the Fifth Amendment to the U.S. Constitution, and a decision that it is illegally taking people’s property without just compensation could mean less revenue for some counties.

 To make it simple let us use this example.  If your taxes are delinquent for 2 years or more, under the law your property will be foreclosed and you lose title to it.  Let’s say you own a property worth $200,000 and the back property taxes, interest and fines you owe on it is $10,000 and the mortgage you owe is $150,000.  When the property is foreclosed on and eventually sold at auction and the county sells the property at auction for $180,000 they would realize a profit of $170,000.  Did you catch the key word “they”, they would realize the profit of $170,000 you and your mortgage lender would not.

The purpose of County tax foreclosure sales and auctions are to allow these counties to recover unpaid property taxes, I am fine with that. However the current Michigan state law allows the counties to keep all the proceeds from a foreclosure sale, not just the back taxes and interest owed by the property owner. Here in Michigan most or all of the state’s counties have taken advantage of this provision in Michigan law to fund their budgets; that I am not ok with.

In the article they state:

 Under Michigan’s property tax system, local governments essentially sell to their county treasurer the rights to collect unpaid property taxes that are more than one year delinquent. In return, the county immediately pays the local government an amount equal to the uncollected back taxes and interest. The money for these county payments comes from an account that counties can create, called a Delinquent Tax Revolving Fund. County boards can spend money in these funds for all kinds of things, not just tax foreclosures.

How does the state allow the counties to keep any profits of the sale of a property above what you actually owe on it?

That is the question.  

Would you call this state sponsored theft?

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