Four certificates expiring because the foreclosure deadline was never diaried is a loss worth studying
Here is a loss pattern that shows up in small tax certificate portfolios, and it is worth laying out with numbers. Picture 46 certificates across three counties at the peak, and the ceiling gets found in the least interesting way possible. In many states a tax certificate has a life. If the holder does not begin the foreclosure or deed application process within a fixed number of years from the certificate date, the certificate expires and the county keeps the money. The exact period and the exact triggering act vary by state and sometimes by the type of sale. Most holders read that sentence in a book early on and treat it as trivia because everything redeems anyway. Say 42 of the 46 redeem. That is the part that does the damage. Every quarter the redemptions come in, the spreadsheet gets updated, and the four that never pay slide down the sheet below the row where the holder stops scrolling. No system, just habit and attention, and the attention is on the ones that are paying. What expires in this scenario: four certificates, $7,940 of face, plus subsequent taxes advanced on two of them, another $2,610. So $10,550 gone with no recovery and no property. Two of those parcels might be vacant land the holder would have been happy to own at that basis. One might be a small house that a title search would probably have shown as a mess. Once the certificates expire, nobody ever finds out. The cause to name is that the holder never separated the two businesses being run. The redemption business needs a spreadsheet you look at when checks arrive. The foreclosure business needs a calendar that fires whether or not you are paying attention, per certificate, at a date computed from the certificate date rather than from anything the holder does. Running one business and pretending it covers both is how the four get lost. What to do differently. On the day a certificate issues, enter two dates in a calendar with alerts: the date to start the deed or foreclosure process, and a date six months before that to decide whether the parcel is worth the legal cost. Also stop advancing subsequent taxes on any certificate that has not already been marked for foreclosure, because advancing money into a certificate the holder has no intention of enforcing is throwing good money at a position already abandoned without admitting it. And confirm the expiration rule for each county in writing at the start, because it is common for counties in the same state to describe the triggering act differently on their own websites.
