RealtyTrac: Far Fewer Zombies In Foreclosure Land

Posted by Patrick Barnard on October 27, 2015 No Comments
Categories : Mortgage Servicing

There were far fewer zombies in Foreclosure Land in the third quarter, according to data recently released by RealtyTrac.

According to the firm's Zombie Foreclosure and Vacant Property Report, there were about 20,050 ‘zombie’ foreclosures nationwide at the end of the third quarter – down 27% compared with the second quarter and down 43% from the third quarter of 2014.

Zombie foreclosures occur when a borrower in foreclosure vacates his home before the foreclosure process is completed. Though some delinquent borrowers walk away intentionally, others are unaware that they still technically own the home and, further, that it might take months or years longer to complete the foreclosure process.

Zombies, however, are becoming a scarcity these days: They accounted for only 1.3% of all vacant residential properties in the third quarter. Although RealtyTrac's report does not say so, these properties tend to be clustered in blighted urban neighborhoods.Â

Zombie foreclosures frequently occur at properties that are underwater. Of the 1.5 million properties that were vacant as of the end of the third quarter, about 6.2% were seriously underwater – meaning the combined value of loans secured by the property is at least 25% more than the estimated market value of the property. Of those same 1.5 million vacant properties, 36.5% had at least one open loan, according to RealtyTrac.

‘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,’ explains Daren Blomquist, vice president of RealtyTrac, in a release. ‘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.’

States with the highest number of zombie foreclosures in the third quarter included New Jersey (3,997), Florida (3,512), New York (3,365), Illinois (1,187) and Ohio (1,028).

States with the highest share of zombie foreclosures as a percentage of total vacant properties included New Jersey (9.4%), New York (8.2%), Nevada (2.7%), Massachusetts (2.5%) and Illinois (2.1%).

Only six states posted a year-over-year increase in zombie foreclosures, most notably Massachusetts (up 66%) and New Jersey (up 29%).

Cities with the highest number of zombie foreclosures included New York (3,531); Philadelphia (1,610); Chicago (989); Tampa, Fla. (984); and Miami (866).

The report also includes figures for all vacant homes – not just zombies.

‘Zombie foreclosures continue to limp along on their way to the final reckoning,’ says Mark Hughes, chief operating officer of First Team Real Estate covering the Southern California market, in the release. ‘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 adds. ‘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.’

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