A zombie foreclosure happens when a home is left vacant by homeowners. There are several reasons as to why this would occur. Some homeowners defaulted on their mortgages, and others had to vacate immediately after receiving a foreclosure notice from their lender.
However, there are cases when the owner mistakenly believes that the foreclosing lender is now responsible for the property, even though the homeowners still hold the current title.
For instance, if the homeowner leaves the property prematurely and the lender does not complete the foreclosure process, no one maintains the property. Since the property has been abandoned for a long time, the basic needs of the home are not met—for example, the lawn or the driveway.
Due to this, the state of the property becomes unsafe and results in lower appearances that eventually cost the entire surrounding community. This means that the home values of the other properties can also be impacted due to this now-known zombie property.
How Does a Zombie Foreclosure Work?
When the homeowner misunderstands the foreclosure process, zombie properties are formed. Most homeowners do not realize that they still hold the legal title of the property. During a general foreclosure process, once the homeowner defaults on the mortgage, they automatically assume that the lender owns the home’s title.
Once the notice of foreclosure is issued, there is a mandated waiting period during which the homeowners can pull the house out of foreclosure by paying a large lump sum. The required payment can include a few past-due payments or the entire mortgage balance.
As mentioned earlier, until a foreclosure goes through, the homeowner continues to hold the title to the property. The process will continue if the homeowner does not pay the required lump sum. Then, later, the court will rule that the house belongs to the lender. Only after this stage does the house legally become the lender’s property that the homeowners must vacate the property.
There are some situations when a lender will decide not to complete a foreclosure. Therefore, the lender will not take the home’s title, but they are not legally obligated to notify the homeowner of this. In this situation, when the title of a home in zombie foreclosure remains in the name of the original homeowner (who is not aware they still own the property), it becomes a zombie title.
How Zombie Foreclosures Impact Homeowners?
Zombie foreclosure creates a tough situation for the homeowner and the entire neighborhood. A homeowner who abandons a property without receiving an adequate foreclosure notice leaves the property without understanding the legal and financial consequences of the notice or their actions.
There are still fees and maintenance costs that come with owning a home. These will not be automatically foregone once someone decides to leave their property. The homeowner still has a legal responsibility to ensure that the necessary upkeep of the home is taken care of.
Eventually, the local authorities can attempt to recover unpaid property taxes or fees or charge the owner expenses for maintenance. To avoid this situation, ensure that you do not vacate your property till you receive proper foreclosure notice and that you no longer hold the legal title of the home.
What Are Some Ways to Save Your Commercial Zombie Property?
If you are a commercial property owner and discover that you still own the property you mistakenly thought was the lender’s responsibility, there are some ways to rectify your situation and save your zombie property.
First, make sure you do not suddenly abandon or leave the property unless you have an official notice from your lender to vacate the property. Remember, you only need to vacate the property if you receive a notice to vacate from the lender. Leaving the property can only create more expenses if you realize later that you still own a zombie title.
Next, you must cooperate with the lender and communicate with them regarding the zombie mortgage. Some lenders will have options for you to restructure your loan with them. They can work with you to avoid foreclosure.
Furthermore, be sure to remove your name from the title for the lender. There should be no assumption when it comes to who owns the title of the property. Be aware of the situation and do your due diligence. If your name shows up on a zombie title, it will be more challenging to purchase property in the future.
Moreover, you can do a short sale, and with a commercial short sale, you can remove your name from the title. This allows you to sell the zombie property at a reduced price. In most situations, lenders will agree to short sales because it permits them to collect some of their money without dealing with the repairs, maintenance, and taxes the zombie property requires.
Lastly, you should try to seek and locate your lender. There are cases when the lenders seem to be lost. However, this does not mean you are off the hook for the mortgage payments, regardless of whether you have a second mortgage. You need to figure out your location and make the necessary payments.
What Are Some Practices When Investing in Zombie Mortgages?
There are some practical ways to have secure investments in a zombie mortgage. However, this is a complex method because you must deal with the homeowners, loan servicers, and lenders who will all have a vested interest in the property. The zombie property lawyers can help you with this process and create a plan to make a wise investment.
Although the zombie properties are generally cheaper, they are not necessarily easy to obtain. Researching and determining how to attain a commercial real estate attorney will be useful. But, having a tax professional can give you an extra boost in understanding how to navigate the zombie properties.
You must inspect the title’s history, owners, and lenders to determine if the property is attainable. During the inspection, ensure that all faculties of the property are functioning, from plumbing to HVAC to electrical, or figure out the costs for repairs and the products to replace them.
The majority of people investing in this endeavor must have hard cash available. You cannot finance a zombie property unless you have a private hard money lender. Most of the time, you must pay the property cash to obtain the title. Remember that the attorney, inspector, appraiser, and property will be costly.
The main factor to determine is why you want to invest in the zombie property and how it will benefit you in the future. You can develop a plan and a strategy to move forward with your business plan. If you have enough cash and are ready to commit to the zombie property, figure out the necessary paperwork to complete the transaction. Seeking out a legal professional in the field will be helpful for you.
When Do I Need to Contact a Lawyer?
If you find yourself in a situation where you thought you did not own the property but still did, you may have a zombie title. There are certain ways to avoid this situation, and if you need further legal guidance, you can contact a local foreclosure lawyer to assist you with the process. Zombie properties can become inhabitable quickly and need attention immediately.
