Long seen as blights on neighborhoods and bank balance sheets, it seems that things might be turning around for zombie foreclosures.
Zombie Foreclosures
Just like the big screen, real estate has seen a rise in zombies over the past couple of years. 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.
The Trend in Zombie Foreclosures
According to RealtyTrac, a foreclosure listing and analytics company, the number of zombie foreclosures on the market is now about 127,000 zombie foreclosures, down 10 percent from just a year ago. That number equates to one in five homes that are in some stage of the foreclosure process.
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 adviser 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.
Rise in Zombie Foreclosures
Despite the fact that zombie foreclosure rates are dropping across the nation, rises are being seen in higher-priced markets like Los Angeles, New York, Boston and Houston. As banks are starting to pick up the pace on the foreclosure process in order to take advantage of rising home prices; former owners are moving out quickly. A vacant house is also the recipe for a zombie foreclosure. The house is basically left behind, lost in a sort of limbo between being owned by a family and being owned by a bank.
“They’ve been able to stay in that home and maybe fight foreclosure for three, four, five years, and now finally the bank is coming back with all their ducks in a row, the proper documentation, and the homeowner is seeing the writing on the wall that I’m going to have to leave and move on with my life,” said RealtyTrac Vice President Daren Blomquist.
Within the last few months it looks like banks have increased their purchases of repossessed homes (often called REOs). These REOs are at a 17-month high as the value of of these former zombie homes rise amid a demanding housing market.
“The average price of a zombie foreclosure nationwide was $195,000, so we’re not talking about just $20,000 or $30,000 properties here,” added Blomquist.
Good News for “Zombie-filled” Neighborhoods
The fact that banks are moving quickly is good news to home-owners in neighborhoods that have a fair share of zombie homes. Ariel Seeley recently moved into a transitional Washington, D.C., neighborhood with her young family.
“For us as neighbors, we’d love to have people move in and occupy the houses,” she said. “It makes it seem a little unsafe or dreary when you’re walking by and you see vacant signs, and you don’t know what’s going on with the houses.”
Despite the nationwide up-tick in full repossession of homes, some neighborhoods are not seeing banks move as quickly. Like all real estate, it’s all about location. Whole some zombies are being annihilated—moved to auction and final sale—W others are not.
“In Chicago, you’ve got a real variation within the city among markets. You see stronger neighborhoods where prices have gone up steadily, and those areas are not where the zombie foreclosures are located,” said Geoff Smith, executive director of the Institute for Housing Studies at DePaul University. “There are neighborhoods that continue to struggle, and those price levels are still well below where they were at the peak or even in 2000.”
While banks are starting to hone in on foreclosures in stronger local markets, there are still costs associated with completing a foreclosure and finally selling the property. For certain locations, the market just can’t bear these costs. For those locations that means the zombies might be here to stay.
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 the law offices of 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.