Zombie foreclosures are an outgrowth of the mortgage crises and devastating affect that event had on real estate throughout the United States, and especially in states like Florida. Tens of thousands of homeowners and borrowers suffered in various ways, from finding themselves out of work and unable to afford to make their mortgage payments to watching the equity in their homes evaporate and being left with a home sometimes a $100,000 or more under the value of their mortgage loan.
The rapid development of underwater mortgages has led to thousands of foreclosures in Florida. Homeowners were unable to afford their homes once predatory lending practices like balloon interest rates kicked in and often doubled their mortgage payment. That, in turn, has led to the phenomena of the “zombie foreclosure” homes.
Borrowers may have stopped making mortgage payments and simply walked away from the home. Because of the confusion over much of the paperwork in many of these loans, legal proceedings and foreclosures may have been delayed in the courts or overlooked by the lender.
A zombie foreclosure occurs when the homeowner walks away from the property, but the lender has not completed the foreclosure process. This leaves the home without an active property owner, and leads to overgrown, weed choked yards, peeling paint, and a general air of disuse and disrepair.
RealtyTrac reports there are 55,000 such property in Florida, the most in the nation. Ironically, the disrepair makes it more difficult for lenders to eventually sell the property once they complete the foreclosure proceedings.
It may make for some bargain opportunities for buyer, however, which are willing to aggressively negotiate an attractive price and are capable of putting additional dollars into the property to bring the “zombie” back to life.
Source: South Florida Business Journal, “Florida leads nation in ‘zombie foreclosures,’ RealtyTrac says,” Brian Brandell, March 13, 2014