Wisconsin Tax Sale Overages Lawsuits: Can Former Owners Recover Foreclosure Excess?

Attorneys working with ClassAction.org are looking to speak with certain people in Wisconsin who fell behind on their property taxes and had their homes foreclosed on to collect the unpaid taxes.

A recent class action lawsuit claims Wisconsin counties have violated former homeowners’ constitutional rights by keeping all the proceeds from tax foreclosure sales instead of returning any excess amounts to the former owners after their tax debts are paid. The lawsuit alleges that any excess proceeds from the sale are the property of the former owner—and the attorneys believe those affected could potentially be owed thousands depending on how much they owed in taxes and how much their home sold for.

According to the lawsuit, Wisconsin recently amended its laws to prevent the state from collecting surplus funds from tax foreclosure sales, but the change does not affect the “unconstitutional takings” that occurred on or before April 2, 2022.

Could I Be Owed Excess Proceeds from My Home’s Tax Foreclosure Sale?

According to the Wisconsin tax foreclosure lawsuit, laws in most states have recognized that when a tax foreclosed property sells for more than the former homeowner owed in taxes, the former owner is entitled to the surplus funds from the sale.

However, until recently, Wisconsin has allegedly enforced state laws that allowed it to keep most of the proceeds from tax foreclosure sales—which often amounted to thousands or tens of thousands of dollars above the former owner’s tax bill, the case says.

For instance, two of the plaintiffs in the lawsuit say they owned a property that was acquired by the county due to a tax debt of $4,762.54. The property was allegedly sold at auction for $31,000. After deducting the costs of the sale and other costs, the state collected $25,837.46 in excess proceeds from the sale of the plaintiffs’ property, the suit says.

According to the lawsuit’s tax sale excess proceeds list, Wisconsin collected between $20,000 and $240,000 in profit from each foreclosure sale of the other six plaintiffs’ properties.

The lawsuit argues that tax foreclosure surplus funds are the property of the former owners—and that Wisconsin violated both the state constitution and the U.S. Constitution by keeping the money for itself.

Other Tax Sale Overages Lawsuits

Several other lawsuits have been filed over real estate tax sale overages, including a case in Minnesota heard by the U.S. Supreme Court. The lawsuit was filed by a Minnesota resident who allegedly owed roughly $15,000 in unpaid real estate taxes, interest and penalties for her condominium. According to the suit, the county seized the woman’s condo and sold it for $40,000, keeping the excess proceeds for itself. In May 2023, the Supreme Court found that the county’s failure to return the tax sale overage to the plaintiff constituted a “classic taking in which the government directly appropriates private property for its own use,” in violation of the Fifth Amendment of the U.S. Constitution.

Another class action lawsuit initially filed in October 2020 claimed two counties in Michigan abused their tax foreclosure processes by keeping all the proceeds from the foreclosure sales without providing former homeowners “any compensation at all.”

The lawsuit resulted in a $38 million settlement with Oakland County that, according to the court, was estimated to provide affected former homeowners “100% of their surplus.”

Though the litigation is still proceeding against Wayne County, an appeals court noted in November 2024 that there was no question as to whether the county had violated the law by keeping private citizens’ excess proceeds from tax foreclosure sales.

“This Court, the Michigan Supreme Court, and the United States Supreme Court all agree that this kind of scheme is an unconstitutional taking,” the panel wrote.

How Could the Wisconsin Tax Foreclosure Lawsuit Help?

If the lawsuit is successful, it may be able to help former homeowners recover any money they’re owed in real estate tax sale overages.

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