Zombie foreclosures occur when homeowners leave their houses before banks start foreclosure proceedings, because homeowners assume the lender will take over the property, anyway.
But banks sometimes don’t finish the process. Since the house is still in the homeowner’s name, though the homeowner no longer lives in the area, the property becomes dilapidated.
One in every five homes in the foreclosure process is sitting vacant, abandoned but not yet repossessed. With no one to maintain them, these zombie foreclosures are falling into disrepair, attracting squatters, vandalism and other crimes that significantly decrease the value of homes in the neighborhood.
There are multiple reasons why banks do not follow through on these foreclosures. Because the majority occur in low-income areas, sometimes the lender isn’t so concerned to take responsibility for the upkeep of the property and wants to save on taxes and other monetary concerns they’d have if they claimed the estate.
Bottom line: Stay in your home during foreclosure. When you leave your property and the title is not transferred out of your name, the following can happen months, or even years later: The tax collector may come looking for property taxes, a lawsuit can be launched against you to retrieve unpaid debts, you can get fined for not complying with housing codes, yard maintenance, trash removal while your credit score, which was already damaged by the foreclosure process, will be even worse due to your unpaid debt.
According to RealtyTrac, the states with the highest numbers of zombie properties include Florida, Illinois, New York, and New Jersey. One reason that these states have a high number of zombie foreclosures is because of those states’ long foreclosure process. People tend to abandon their property when the process drags on and on.
Though zombie foreclosures are gradually decreasing, it is still a troublesome issue. If you’re in the unfortunate circumstance of foreclosure, make sure you take steps to ensure your home doesn’t become a zombie.