Residential real estate has its own version of the 1968 cult classic “Night of the Living Dead.” You could call it “Zombie Foreclosures.”
RealtyTrac, a search engine that collects real-estate data nationwide, defines the phenomenon: “Properties that have started the foreclosure process but have never been foreclosed and the homeowner has vacated.”
One in five U.S. homes in foreclosure, or 141,406, are zombies, it says.
Andrew Frank, of Long & Foster Real Estate in Blue Bell, Pa., said he’s been told that many zombies rose from the “robo-signing” era of 2008 through 2010, when some mortgage servicers didn’t bother to read foreclosure documents before submitting them to courts or other agencies for action.
“Even though the defaulters have vacated, the courts forced the banks to restart the foreclosure process, which added to the already high volume at the time,” Frank said.
Zombies sit in all kinds of neighborhoods, among the well-to-do and the less well-heeled, local observers said. In some cases, said Carol McCann, of Re/Max Millennium in Philadelphia, many who received notices of foreclosure simply vacated, “assuming that the bank now owns the property.”
At the height of the foreclosure crisis, sales of distressed housing outpaced all others, depressing prices and undercutting efforts by homebuilders.
“If lenders put them all on the market for sale at once,” it would drastically change property pricing, said Noelle M. Barbone, office manager at Weichert Realtors in Media, Pa.
That has little chance of happening, however.
“We have submitted good (purchase) offers to banks, but there is still way too much red tape to make anything move faster or get better,” said Val Nunnenkamp, of Berkshire Hathaway Home Services Fox & Roach Realtors in Marlton, N.J.
Frank Dolski, of Coldwell Banker Hearthside in Lahaska, Pa., said zombie properties often sit as long as three years. In one case, in a “million-dollar neighborhood,” one property that has not been maintained has had an impact on the values of others.
“When the bank finally sells, the subject property will be tremendously affected,” Dolski said.
Attorney William D. Schroeder Jr. estimated he had 10 zombies in his client files.
“A number of my clients have surrendered them as part of a Chapter 7 (bankruptcy),” he said. “I notify the mortgage company departments and the companies do not move forward.
“I personally believe their inventory is just too large and they are understaffed,” Schroeder said. “The properties sit there blighting the neighborhood. I advise my clients to take the minimum steps to secure the property and keep it safe from the elements and vegetation.”
RealtyTrac said Wells Fargo had the most zombies – 18,695 nationally.
Wells Fargo spokeswoman Barbara Nate said it does not comment on “reports issued by third parties.”
If a property is delinquent and vacant and has not yet gone to foreclosure sale, she said, Wells Fargo moves to complete the foreclosure quickly and maintain and secure the property in the interim.
She said the lengthy foreclosure timeline in certain areas “delays our ability to complete renovations to get many properties on the market and in the hands of new owners.”