The Zombie Foreclosed Homes Inventory: What You Should Know

From 2007 to 2012, there were more than 4.5 million foreclosures in the U.S. Recent data from the real estate analytic firm RealtyTrac shows that the level of foreclosure activities has fallen to seven-year lows. In February, year-over-year foreclosure filings decreased by 27 percent. Despite this decline of the foreclosure level to more historic levels, this aspect of the housing market continues to have problems.

It seems a significant number of homes are actually “zombie foreclosures.”

The Problem of Zombie Foreclosures

This term refers to a situation where the mortgage lender has actually started the foreclosure process, but the process gets caught up in financial or legal situations, which ends up delaying the process. In the meantime, the owner actually vacates the property, but the bank never takes title to the property and responsibility for its upkeep.
However the former property owner vacates the property at some point in time by that they steal have legal title to the home for which they are still responsible fine he and other costs although they have left the home taxes and other(.
According to the data, of the more than 152,000 homes across the country that are currently in the foreclosure pipeline, approximately 20 percent have been vacated by the owner.

Metropolitan Markets with the Highest Rate

These vacant homes created a burden on the communities where they are located. Maintenance has become a real issue and the longer they are vacant, the more they will need in terms of repairs. They have also become a haven for vandalism and crime.

Most of these zombie foreclosures are primarily located in five metropolitan areas:

• New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa.
• Miami-Fort Lauderdale-Pompano Beach, Fla.
• Chicago-Naperville-Joliet, Ill.-Ind.-Wis.
• Tampa-St. Petersburg-Clearwater, Fla.
• Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
• Orlando-Kissimmee, Fla.
• Jacksonville, Fla.

In California, the zombie foreclosure rate has fallen 57 percent since last year. Arizona, Nevada and Washington have also experience a significant drop in this category.

Buying Zombies for Your Real Estate Investment Portfolio

Buyers looking for personal residences and real estate investor interested in these properties will need to closely examine the degree of deterioration of  these foreclosed homes to determine if it is a good buy. Harvard sponsored a study that looked at zombie most foreclosure in the City of Cleveland over the past 10 years. Research shows that homes that suffered significant damage were not financially feasible for candidates “gut rehabs” in most of the city’s neighborhoods.

Since the viability of renovating a zombie foreclosure will depend on the market conditions in your location, buyers will need to conduct the necessary due diligence. Make sure that you take into account the cost of acquisition and rehab and compare it to property values in the area and other numbers as applicable, i.e. cash flow.

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