A new report from Pacific Legal says its study of local government actions in Minnesota regarding late tax bills found homeowners lost nearly $118 million to the problem of “home equity theft.”
The issue is that when people fall behind on paying taxes, the laws provide that the government eventually can take the home and sell it for the taxes.
But in Minnesota and some other states governments simply take the home, sell it, and keep ALL of the proceeds, not just what’s due for taxes.
The new study, done by Pacific Legal, looked at such late-tax cases in Minnesota’s most-populated regions, including Anoka, Beltrami, Dakota, Hennepin, Kanabec, Olmsted, Ramsey, Scott, St. Louis, Washington and Wright counties.
Those counties are home to a large majority of all Minnesotans.
In the 2014-2020 time period there were 570 homes taken and sold for a total of about $9.9 million in taxes due.
But the value of the homes was almost $128 million, meaning the homeowners lost almost $118 million.
Explained Pacific Legal, “An unlawful scheme is enriching local governments at the expense of Minnesota homeowners, who are losing hundreds of thousands of dollars in home equity.”
It said its study found Minnesota homeowners “lose an average of 92% of the equity in their home.”
It cited as an example Geraldine Tyler, a 92-year-old widow, who had her Minneapolis condo valued at about $90,000 sold for about $40,000, over a debt of only $15,000.
But she got none of the leftovers, the government kept it all.
“Tyler’s story isn’t unique. Pacific Legal Foundation’s report found that from 2014 to 2020, more than 1,200 Minnesota homes were subject to tax foreclosures in 12 counties. Most homeowners’ debts were less than a tenth of their home’s value, resulting in the theft of $207,000 in home equity on average,” the organization said.
“Home equity is property, and it’s protected by the U.S. and Minnesota Constitutions,” said David Deerson, an attorney at Pacific Legal Foundation. “Although the government can take property to settle tax debts, it can’t take more than it is owed. Doing so amounts to unconstitutional home equity theft.”
Pacific Legal Foundation is representing Geraldine Tyler in her legal challenge to Minnesota’s home-equity theft scheme.
“Across the 12 counties we studied, over 1,200 Minnesota homeowners and families have fallen victim to home equity theft in recent years,” said Carol Park, Pacific Legal Foundation’s strategic research analyst. “Often these foreclosures and the related equity theft hurt vulnerable citizens whose home equity represents the bulk of their savings. Minnesota should address this problem immediately.”
Last year the Michigan Supreme Court struck such manipulations in that state, and North Dakota has enacted legislation to protect property owners there. However, there still are many stills that allow the “home equity theft” when property owners fall behind on taxes. Those include Colorado, Nebraska, Oregon, Illinois, New York and Maine.
The study also pointed out the governments actually gained only about $12 million in undeserved funding, because “properties forfeited through tax foreclosure are usually sold at prices significantly below their full estimated market value.”
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