RealtyTrac: More Zombies Relative To Foreclosures

Posted by Patrick Barnard on February 06, 2015 No Comments
Categories : Mortgage Servicing

About 25% of the homes that were actively in foreclosure in January were vacant, up from 21% in January 2014, according to a report from RealtyTrac. These properties where the homeowner walked away prior to the bank repossessing are commonly known as ‘zombie foreclosures.’

As of the end of January, 142,462 homes actively in the foreclosure process had been vacated by the homeowners prior to the bank repossessing, according to the firm. The increase means a higher percentage of homeowners are choosing to walk away at some stage during the foreclosure process.

Still, the number of zombie foreclosures was down 6% compared to one year earlier, due to the drop in foreclosure volume.

‘Although the number of vacated zombie foreclosures is down from a year ago, they represent an increasing share of all foreclosures because they tend to be the problem cases still stuck in the pipeline,’ explains Daren Blomquist, vice president at RealtyTrac, in a release. ‘Additionally, the states where overall foreclosure activity has been increasing over the past year – counter to the national trend – tend to be states with a longer foreclosure process more susceptible to the zombie problem.

‘In states with a bloated foreclosure process, the increase in zombie foreclosures is actually a good sign that banks and courts are finally moving forward with a resolution on these properties that may have been sitting in foreclosure limbo for years,’ Blomquist adds. ‘In many markets there is plenty of demand from buyers and investors to snatch up these distressed properties as soon as they become available to purchase.’

Florida, New Jersey and New York had the most zombie foreclosures, as of January.

Florida had the highest number of any state with 35,903 – down from 54,908 in the first quarter of 2014.

New Jersey had 17,983 zombies, and New York had 16,777.

Other states with a high rate of zombies included Illinois, with 9,358, and California, with 7,370.

‘We are now in the final cycle of the foreclosure crisis cleanup, in which we are witnessing a large final wave of walkaways,’ says Mark Hughes, chief operating officer at First Team Real Estate, covering the Southern California market. ‘This has created an uptick in vacated or 'zombie' foreclosures and the intrinsic neighborhood issues most of them create.

‘A much longer recovery, a largely veiled underemployment issue and growing examples of faster bad-debt forgiveness have most likely fueled this last wave of owners who have finally just walked away from their American Dream,’ Hughes adds.

Other states among the top 10 for most zombie foreclosures were Ohio (7,360), Indiana (5,217), Pennsylvania (4,937), Maryland (3,363) and North Carolina (3,177).

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