5.7 min read
What is a Zombie Property?
Zombie Foreclosure Definition
A zombie foreclosures occurs when a lender or trustee has taken possession of a property and begun foreclosure proceedings against it, but the borrower has not been served with any papers. The borrower may have moved out of state, gone bankrupt or died. If this happens before the foreclosure sale takes place, then the foreclosure process cannot move forward because there is no legal owner for the property to sell it to.
The term “zombie” comes from the fact that these properties are still technically alive, even though they are dead as far as the law is concerned. This means that if you were to go into the property today, you would find all sorts of things going on: utilities being turned on, mail being delivered, etc. However, none of this is legally binding. It is just an act of kindness by the bank to keep the property occupied until the foreclosure sale can take place.
Zombie foreclosures are a problem for homeowners and hurt the housing market. If you want to avoid this problem, you should contact your lender immediately and ask them to delay the foreclosure process. This way, you can save your home from being sold at auction.
The problem is that banks don't want to accept this risk. They prefer to hold onto foreclosed properties rather than take them back. This creates a shadow inventory of homes that aren't available for sale. As long as the bank has a mortgage on the house, it doesn't want to let anyone else know about it because if someone buys the house, they could potentially pay off the mortgage and then resell it at a higher price.
The zombie foreclosures result from the mortgage crisis, which has led to a large number of homeowners being unable to pay back their mortgages. As a result, lenders have started sending out default notices to those who have fallen behind on payments. These borrowers then face losing their homes unless they find a way to repay the money owed.
In some cases, these borrowers may be able to negotiate with their lenders or even sell the house to another buyer before the foreclosure process begins. However, many people simply decide to walk away from their homes instead of facing the consequences.
This leads to an increase in the number of zombie foreclosures in residential property. In fact, there are now over 1 million vacant properties across the country.
How Does a Zombie Foreclosure Occur?
- A zombie foreclosures occur when the property owners receive a foreclosure notice but decide to ignore it. The property owners then leave the house without paying attention to what happens next.
- When a borrower ignores a notice of default, the lender sends a letter to the borrower informing them that they need to make arrangements to clear up their financial problems within 30 days.
- After the borrower fails to do so, the lender starts the foreclosure process by filing a lawsuit against the borrower.
- Unpaid property taxes
- Once the court issues a judgment, the lender takes possession of the property.
How Zombie Homes Can Hurt Homeowners And Neighborhoods
The problem is that many homeowners who receive notices of default don't know what to do next. They may not understand the process or think it won't affect them because they aren't behind on payments. In fact, if the homeowner doesn't respond to the foreclosure notice, the lender can take possession of the house without any further action. This means that the homeowner loses control of the property, leading to several problems.
One of the most common problems is that the house becomes unoccupied. Because the owner isn't living there anymore, no one checks to see whether the house needs repairs. Eventually, the condition of the house deteriorates until it falls into disrepair.
Another issue is that the house can become a target for crime. If the house is left empty, criminals can break in and steal anything inside. This includes valuable items such as jewelry, electronics, art, and other valuables. It also includes things like furniture, appliances, and tools.
A third issue is that the neighborhood suffers. Many neighborhoods have been built around houses. When a house goes vacant, it can cause a decrease in property values. This makes it harder for new buyers to purchase homes in the area.
A fourth issue is that the house becomes a burden for taxpayers. When a homeowner stops making payments, the government must step in and cover maintaining the home. This includes taxes, insurance, utilities, and maintenance fees.
How To Buy A Zombie House
The process of buying a zombie house is similar to purchasing any other real estate:
- You must determine if it's worth buying. If not, then you should consider renting instead.
- You need to find out what kind of mortgage terms are available.
- You'll want to look at the neighborhood and see any issues with the house.
- You'll need a lender who is willing to finance the deal.
The 5 Advantages of Investing in Zombie Homes
The advantages for real estate investors in zombie properties include:
1) the potential for a quick return on investment;
2) the opportunity to acquire distressed real estate at a discount;
3) the ability to invest in properties without having to worry about maintenance costs;
4) the possibility of making money from rental income if you choose to rent out the property;
5) the ability to avoid paying taxes on any appreciation in the property's value.
Final Thoughts on Zombie Real Estate
The best way to avoid this scenario is to not fall behind on mortgage payments. If you've fallen behind, contact your lender immediately and ask them what steps they plan to take to prevent the foreclosure from going forward.