A single mother is asking the Michigan Supreme Court for the just compensation she is owed

In 2020, the Michigan Supreme Court affirmed that it was unconstitutional for counties to keep more than they’re owed when collecting property taxes through the foreclosure process. But that wasn’t necessarily the end of struggle for Michiganders. For some homeowners, the struggle to recover the just compensation they are owed is still ongoing.

A fresh start

Chelsea Koetter and her two sons have been through a lot over the past several years.

Chelsea had settled in Las Vegas, a long way away from her family in Michigan. Around 2016,  she was struggling in Vegas. She turned to her father, Bob, and asked if she could come home to Michigan, where she would have the family’s help to give her sons the life they deserve.

Bob didn’t bat an eyelash before bringing Chelsea and the boys to Michigan.

Bob had married Chelsea’s mother when she was just five years old. For Chelsea, he is the only father she has ever known and Bob has always treated her like his own flesh and blood. Since Chelsea’s mother passed away in 2006, Bob has become her only parent and has always stepped up when his daughter and grandsons need him.

Bob’s family has deep roots in Arcadia, Michigan, where they have owned a farm for 145 years. He eventually bought his own home close by in Bear Lake. Bob thought it was important to find Chelsea somewhere to live where she could be surrounded by family.

Finding a rental property was harder than Chelsea imagined. Everything was either out of her price range or completely rundown. Bob decided to help Chelsea buy a home. “I’ve got the funds to buy a home and I’ll be the landlord, and then your rent will go towards the purchase of the house,” he told Chelsea.

The home they bought was perfect for Chelsea’s family. Her favorite part was the deck that had a beautiful view of Bear Lake, which is just across the highway. Chelsea loved to sit in her rocking chair every night, pet her cat, and watch her boys play basketball while taking in the beautiful view. As Bob describes it, “It’s not a million-dollar mansion, but it’s got a million-dollar view.” Bob paid for the home in cash and owned it free and clear while Chelsea made her monthly payments.

Bob split his time between Michigan and Alaska, where he frequently traveled for work. During this time, Chelsea hit a rough patch again and fell behind on her 2018 taxes. Bob was diligent in helping her get back on track, but this is when things got complicated.

As Bob remembers, “I went down to [the township to] pay the taxes in ’19 and asked if that was everything. And they said, ‘Yeah, you’re all caught up.’” What he wasn’t told is that after the debt had been in the township for a year, the unpaid bill transfers over to Manistee County. In Bob and Chelsea’s case, that meant there was still a past-due balance with the County.

Flash-forward a couple of years, and Bob had gone back to work in Alaska and neither he nor Chelsea knew that the property taxes were still an issue.

In June 2021, Chelsea saw a man lurking outside her house. When she confronted him, the man said her house was in foreclosure over the unpaid taxes. Bob was in Alaska and Chelsea didn’t want to burden him. But Bob was still  calling to check in with Chelsea every day. One day she blurted out what had been going on: “Dad, I’ve lost the house.”

An overcomplicated process

The situation didn’t make sense to Bob. He had done his due diligence to make sure the back taxes were paid. Yet, the County still took the home and, once it sold at auction, would be keeping every cent of the sale even though it far exceeded what was owed.

In 2020, just after the Michigan Supreme Court’s home equity theft decision, state lawmakers enacted a new procedure to allow former homeowners to reclaim the surplus proceeds a county kept after it sold a foreclosed property. But the process was not transparent or simple enough for most individuals to understand without the help of lawyers, which many can’t afford. In short, the system is set up to fail, which is what Chelsea and her family came to learn.

The state process works like this:

1. The clock starts each year on April 1 when tax-delinquent property titles shift to the government.
2. The former owners have until July 1—a three-month window—to track down, fill out, notarize, and properly file a specific form that serves as formal notice of intent to claim remaining proceeds.
3. The property is sold between August and November, after which the county treasurer notifies owners of any excess proceeds.
4. The former owners must then file a motion in circuit court between February 1 and May 15 of the following year to recover any excess proceeds—a year or more after losing their property.
5. At this point, property owners who actually survive the claim process will get their rightful surplus.

The family was desperate to save the home and decided it would be best to go speak to someone in person. But they were too late to save Chelsea’s home and there was nothing she could do. Not once during this visit were they told about the form.

The only reason Chelsea ever found out about the form was because Bob’s girlfriend, who worked for a city government, asked around and was informed of the process. Chelsea acted quickly to submit her claim to receive the money that was owed to her.

She submitted her claim on July 9 and while it was past the July 1 deadline, a county worker told her that with all the COVID-19 chaos and closures, she would surely be given an extension. That was not the case. Her claim was denied because she had missed the July 1 deadline by a matter of days.

Her house would be sold and the only way for the family to save it was to buy it back at auction. Just like everything they had been told, this information was incorrect. The law gives homeowners the option to pay and reclaim their property right up until the auction. In short, there was something that could be done, but the County wasn’t going to let it happen.

Buying the home at auction would mean paying for it twice, and all over an original past-due balance of $3,863. Chelsea did not have the means to bid on her home, and the situation seemed bleak. As infuriating as it all was, Bob considered it a miracle that there was still a chance to save the home, and he decided he would bid on it. He figured out how to bid online, and, somehow, he was able to repurchase the home. In the end, he paid $106,000 plus a 10% auction fee. The total tax debt, including all penalties, interest, fees, and costs was only $3,863. Yet the County kept all $106,000.

When Chelsea’s mom was dying of breast cancer, she asked Bob to look after Chelsea and her family. Bob was never going to break his word, no matter how much it cost.

“For me, it’s always been about keeping that promise,” Bob says, “even when I had to go buy the house the second time. It’s about keeping a promise to my wife that I would help take care of Chelsea and the boys.”

To buy the home, he had to borrow against his 401(k), a decision that was necessary but that significantly set him back financially. When all the money he spent on the house is added up, it is about $250,000—a chunk of which he is still working to pay off. Not to mention, because his name is now on two properties—his own and Chelsea’s—his  property taxes went from $1,200 a year to over $4,000.

Bob’s act of love is touching, but the County should have kept only the money that it was owed, not the entire proceeds from the sale. The family tried to fight back in circuit court and the Michigan Court of Appeals, but it was to no avail.

Bob is struggling to stay afloat financially, but he’d do it all over again. “Failure wasn’t an option—it wasn’t an option,” he emphasizes. “I had to succeed in maintaining that home in my family for my kid and my grandsons.”

What the County did to Bob and Chelsea is unconstitutional, as Chelsea has a right to collect the excess money from the sale of her home.But the path to collecting her own money is slippery and only a fraction of owners manage to navigate it. PLF research shows that in 2022, Oakland County sold 196 foreclosed properties for more than what was owed, but only nine owners successfully claimed their own money.

Both the Michigan Supreme Court and the United States Supreme Court have ruled that individuals must receive just compensation when the government takes more than it is owed. Michigan cannot use its claims process to deny individuals of this right.

When Pacific Legal Foundation heard about the family’s story in July 2022, our attorney reached out to Chelsea and Bob. But Bob’s family had been put through the ringer and he was skeptical that anyone would want to help him. After verifying PLF’s mission, however, Bob gave Chelsea the green light. We are now working with Chelsea and Bob to demand that Manistee County do what state law and the Constitution require and pay for the windfall that the County took at Chelsea and Bob’s expense.

“Taking someone’s property away from them shouldn’t ever have been allowed in any state, in any county, and for sure, not in the United States of America,” Bob says.

Chelsea was fortunate to never have to leave her home, but it came with a hefty price tag. Others have not been so lucky. That is why PLF is fighting for people all over the United States who are still dealing with the consequences of home equity theft.

This case is the latest in PLF’s ongoing work to defeat home equity theft across the country, but the fight is far from over.