What Should You Know About 'Undead' Property Foreclosures
Zombies are soulless corpses, the undead; an apt metaphor for abandoned homes that could become nightmares to the owners of record. Homeowners who get a foreclosure notice often walk away. They think that despite the hit to their credit, they are finally free of the burden of trying to pay for a house they can’t afford, but, like the living dead, a zombie property can come back to bite you. Here's why...
For many reasons, banks don’t always follow through with foreclosures. Lenders have a backlog of inventory to sell off now, so why add to it immediately? One Bank of America-owned home in Port St. Lucie, Florida, built last year and near the canals, is selling for $13,700. That’s only $900 more than the cost of America’s least expensive new car, the Nissan Versa. Why would the bank want to take possession of a similar home nearby? Doing so would only depress the selling price of both.
There are legal costs involved in following through with foreclosure. Foreclosures begin with loan document examination, certified mailings, process serving and attorney’s fees. After the notice, the attorney's fees get joined by more legal communication but also auction advertisements and sheriff's costs.
Zombie property owners are still liable
The most important point to remember if you're facing foreclosure is that until the title is transferred to another, the owner of a foreclosed home is still responsible for it. That means the lender can keep adding fees to your debt, from late fees for non-payment to property inspection fees.
Properties facing foreclosure are often poorly maintained by cash-strapped owners. The lender can charge the owner a slew of property preservation fees including replacing the locks, repairing the windows, winterizing the home and maintaining the landscaping for curb appeal.
Your home lender's point of view
If your home is in severe disrepair, the lender might decide that your property isn't worth preserving. The lender might decide to stall or even abandon the foreclosure process. If that happens, the property becomes a zombie—a house but no longer a home—doomed to deterioration.
The lender might not tell the borrower of its decision, because it is under no obligation to do so. Even if it does try, the owner might be impossible to reach without a permanent address.
Legality and the zombie home
If your former home becomes a haven for squatters, dealers, prostitutes, gamblers and others engaged in illegal activity, you could be prosecuted in some jurisdictions under what's commonly known as a "crack house law." If somebody gets hurt on your property, you would be liable for the injury.
Until your name is off the deed, you are still legally obligated to pay property taxes as well. Penalties, fees and taxes can continue to accrue, all without your knowledge. Someday you could have your tax refund garnished or be sued by the local government for the cost of bringing your house back up to minimal standards. In the worst case, your home could be demolished. Then you’d be responsible for a bill of between $10,000 to $30,000.
In New York, State Senator Tim Kennedy has introduced legislation to combat zombie properties by pushing banks to speed up the foreclosure process once a home has been abandoned. The bill will require banks to maintain a property if it becomes vacant after they commence a foreclosure proceeding. If they don't they'll be liable for criminal charges. Efforts like this should be made by lawmakers across the U.S. to forestall neighborhood blight.
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Related Stories:
What to Know Before Buying a Foreclosure
Is Foreclosure Ever a Good Idea?
Foreclosure Freeze — What to do if You Bought a Foreclosed Home
