What do homeowners / buyers need to know about ‘zombie mortgages’

Zombie mortgages, also known as “zombie properties” or “zombie foreclosures,” refer to properties where homeowners have abandoned the property or stopped making mortgage payments, but the foreclosure process has not been completed by the lender. Zombie mortgages occur when homeowners move out of their properties, assuming that the foreclosure process will resolve their mortgage debt, only to find out later that they still hold legal ownership and responsibility for the property. This was a very common issue in some states following the sub-prime meltdown in the mid 2000’s. The legal system in Florida, for example, was so backed up due to the massive wave of foreclosure that it took lenders years to foreclose on properties. In some cases, lenders just walked away altogether and gave up trying to take the property back.

Zombie properties can become eyesores and negatively impact the surrounding neighborhood. These homes often fall into disrepair, leading to decreased property values and increased blight. The lenders wont do anything but secure them until they take the property back and actually own it. If the homeowners vacates, nobody will cut the grass. The power will get cut off. Etc. This can cause a house to go downhill quickly as far as condition goes. Homeowners with zombie mortgages may still be legally responsible for the property even if they have moved out. They may also be liable for property taxes, homeowner association fees, maintenance costs, and other expenses until the foreclosure process is completed.

Homeowners who unknowingly have zombie mortgages may have significant negative impacts on their credit scores. Missed mortgage payments and the subsequent foreclosure process can lead to lower credit scores, making it challenging to secure future loans or credit. Although homeowners may have abandoned the property, the lender may not have completed the foreclosure process. As a result, the property remains in the homeowner’s name until the foreclosure is finalized. This means that the lender can potentially pursue legal action or seek to collect outstanding mortgage debt.

Buyers interested in purchasing foreclosed properties should exercise caution. Zombie mortgages can complicate the title transfer process, leading to legal challenges and delays. It is crucial to conduct a thorough title search and work with a qualified real estate attorney to ensure a clear and clean title. Whether you are a homeowner or a buyer, it’s essential to do your due diligence. Stay informed about your mortgage status, communicate with your lender, and seek legal advice if necessary. Buyers should research the property’s history and work with professionals who can guide them through the process. Any prospective buyer looking to purchase a property that may be a zombie should work with a reputable title attorney to close the transaction. They will do a full title search to make sure there are not any problems and if there are issues they will work to get them resolved prior to closing. Plus they will issue title insurance to the buyer so if some issue pops up down the line the insurance company will cover it. Just as an aside, anyone buying any type of property should always use a reputable title company to close the deal.

Zombie properties are often neglected and may require significant repairs or renovations. Buyers should carefully assess the condition of the property and factor in the associated costs before making a purchase. Anyone looking to purchase a zombie property, or any property for that matter, should have a thorough home inspection done by a licensed home inspector or a licensed contractor.

If you suspect that a property in your neighborhood is a zombie property, report it to the local authorities or housing agencies. There isn’t a whole lot they can do but they can take appropriate steps to address the issue and help mitigate the potential negative impact on the community. Cutting the grass is the main thing and they may be able to board the property up if the lender fails to do so. Dealing with zombie mortgages can be complex. It is advisable to consult with professionals such as real estate agents, attorneys, or housing counselors who specialize in foreclosure and distressed properties. They can provide guidance tailored to your specific situation.

The laws and regulations regarding zombie mortgages can vary by jurisdiction, so it’s important to seek local advice and stay informed about the specific laws that apply to your situation.

If you have a zombie house in your neighborhood, give us a call, we can help. We may be able to track the owner down and make a deal to buy it, get it back in service and get rid of that eyesore in the neighborhood. Plus, we love to pay referral fee’s for stuff like that. Information is power! www.nolabuyshouses.com or 504 264 1407

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