According to a recent data analysis by RealtyTrac, there were fewer zombie foreclosures listed in the third quarter of 2015. There were only 20,050 at the end of the third quarter, which is down 27% when compared to 2014’s second quarter, and down 43% when compared to 2014’s third quarter.
The aptly titled “zombie foreclosure” refers to a vacant property that is in some stage of the foreclosure process. While you may have never seen a zombie in real life (apart from Halloween or a dress up party), chances are you’ve seen a zombie foreclosure. They’re known to ruin neighborhoods with their unsightly and un-kept appearance. These vacant properties are left in limbo – former owners gone yet still not repossessed by the bank – often falling prey to vandalism and sometimes squatters. Just like their big screen counterparts, they suck the life out of not only the neighborhood, but also the housing market.
Often times banks let these properties sit for so long because of multiple reasons: little value and also endless processing issues. But now it seems that things might be changing for zombie foreclosures. As the legal processes governing foreclosures are being streamlined, and as prices of homes nationwide increase, these zombie foreclosures are becoming more valuable. Because of this, banks are now pulling them out of “zombie status,” pushing them through foreclosure, and getting them out on the auction block.
Trends Since January
During third quarter, it appears that zombies accounted for only 1.3% of all vacant residential properties.
This is a drop from January, when RealtyTrac reported that almost one in four home had already been abandoned by an owner prior to being repossessed by the bank. Though the numbers of these zombie foreclosures had fallen 6% since 2014, 19 states, including California, had seen a resurgence as of January.
It’s not uncommon for a “zombie” to occur at properties that are underwater, meaning that the combined value of loans secured by the property is at least 25% more than the property’s estimated market value. As RealtyTrac found, of the 1.5 million properties that have been vacated at the end of the third quarter, 6.2% of them were underwater. Additionally, 36.5% of those underwater properties had at least one loan open. .
“The overall inventory of homes in the foreclosure process has dropped 36 percent over the past year, so it’s not too surprising to see a similarly dramatic drop in vacant zombie foreclosures,” explained Daren Blomquist, vice president at RealtyTrac. “What is surprising is there are so many vacant homes where the homeowners do not appear to be in financial distress – with only three percent in foreclosure or bank-owned, and only six percent that are underwater. More than 63 percent of these vacant homes are not even encumbered by a loan, owned free and clear by the owner. The fact that the homeowners are not selling given the recovering real estate market in most areas indicates that many of these properties are in poor condition and in neighborhoods that have been left behind by the housing recovery.”
“Zombie foreclosures continue to limp along on their way to the final reckoning,” said Mark Hughes, chief operating officer with First Team Real Estate. The company covers the Southern California market specifically. “Uncared for, these lifeless shells are a scary eyesore to any would be seller as they scare buyers interested in nice neighbors away.
“To start, the best idea for potential home-sellers with a zombie foreclosure or vacant property nearby is to find out which bank has the note and lean on them to clean up, secure and make these homes safe,” Hughes added. “It may be worth it for sellers, to send a lawn crew over to spruce up the yard at times to help with curb appeal.”
So while it seems that things might just be turning around for these blights on neighborhoods and bank balance sheets.
The Foreclosure Process
Facing foreclosure can be a scary thing. The majority of foreclosures that happen in California are nonjudicial foreclosure. That means the lender does not have to go through the court to foreclose on your home. As a result, this process can be carried out more quickly, which is good for the lender, and not good for you. The first step you can take towards fighting your foreclosure is to understand the process outlined below. Next, you might want to consider working with a bankruptcy attorney that can advise you on options for how to avoid foreclosure.
Foreclosure Avoidance Assessment
During the Foreclosure Avoidance Assessment, a lender is required to contact everyone listed on the mortgage loan so that they can assess the financial situation and explore any potential options to avoid foreclosure.
Additionally, the lender is not legally allowed to begin the process of foreclosure until at least 30 days after contacting those listed on the mortgage to make this assessment. The lender is also legally supposed to tell you during the first contact that you have the right to request an additional meeting to discuss how to avoid foreclosure. This meeting must be scheduled to take place within 14 days of that initial contact.
You do not have to go through this process alone. You can authorize a foreclosure lawyer, HUD-certified housing counseling agency, or other advisers to speak with the lender on your behalf. You will not be forced to accept any plan that is reached during that discussion.
Notice of Default
If you, the lender, or your lawyer are not able to find a plan to avoid foreclosure, then the lender will record a Notice of Default in the county where your home is located. This Notice of Default is the beginning of the formal and public foreclosure process. This will be issued at least 30 days following the initial contact for foreclosure avoidance assessment. Your lender must send you a copy of this notice via certified mail within 10 business days of it being recorded. You have 90 days from the date the Notice of Default is recorded to fix the default, usually by paying what is owed.
Note: Before the foreclosure process begins, the lender may send you letters that are NOT notices of default, but demand payment. If you are unclear what to do with these, contact an attorney.
Notice of Sale
If you are not able to pay what is owed, a Notice of Sale is recorded 90 days after the Notice of Default is recorded. The Notice of Sale means a trustee will sell your home at auction in 21 days.
The Notice of Sale must:
– Be sent to you by certified mail.
– Be published weekly in a generally circulated newspaper in the county where your home is located for 3 consecutive weeks leading up to the sale date.
– Be posted on your property, as well as in a public place.
– List the date, time, and location of the foreclosure sale, as well as the property address; the trustee’s name, address, and phone number; and a statement the property will be sold at a public auction.
Property Sold at Public Auction
After the Notice of Sale is recorded, the property can be sold at public auction at least 21 days after. A successful bidder will be required to pay the full amount, either with cash or a cashier’s check in order to receive a trustee’s deed. The lender usually bids at the auction, in the amount of the balance plus the foreclosure costs. If no one else bids, the home goes to the lender.
Working with an Attorney
If you are unable to keep up with your mortgage payments, you’ll want to contact a lawyer that can help you avoid home foreclosure. It is easy to feel helpless in a situation like this. The right lawyer can help save your home using a number of legal options, including Chapter 13 bankruptcy. At RHM LAW LLP, we help the people throughout the San Fernando Valley, Los Angeles, Riverside, San Bernardino and Orange counties to avoid home foreclosure and get the debt relief they deserve. If you need to avoid home foreclosure and you have decided to pursue bankruptcy as an option or home loan modification, we will help you save your home.