Zombie foreclosures and vampire foreclosures are recent trends in the foreclosure landscape. They are appropriately named because foreclosures are always scary, and particularly so in these situations. (Zombie foreclosures are scary for homeowners and vampire foreclosures are scary for the economy).
If you are a homeowner facing foreclosure, you could be haunted by a zombie foreclosure. How? You receive a foreclosure notice from the bank (perhaps it’s a Notice of Default, Notice of Foreclosure Sale, or some other notice that the mortgage servicer provides to initiate a foreclosure or move it down the line), decide to walk away from your home, pack up, and leave – assuming the foreclosure will go through.
But here’s the catch: Sometimes the bank won’t complete the foreclosure, or at least not right away. (To learn why this happens, see Nolo’s article Zombie Foreclosures.) While your home is in limbo, you remain the legal owner. This means you are on the hook for property taxes, HOA dues, and maintenance on the property. Homeowners that get haunted by zombie foreclosures are often shocked when months or years later they:
- are sued for unpaid property taxes or HOA assessments, or
- get bills or face fines for violating housing codes and ordinances as the home and property fall into disrepair or get vandalized.
Needless to say, these additional unpaid and delinquent debts don’t help your efforts to rebuild your credit after the foreclosure.
How to Avoid a Zombie Foreclosure
The best defense to a zombie foreclosure? Stay put until the foreclosure sale has occurred and you receive a notice to vacate. It’s also a good idea to confirm that title to the home has actually been transferred to the bank. You can do this by checking with the local county recorder’s office or website.
Vampire foreclosures are not scary for former homeowners, but some experts are worried that too many of them will haunt the economy.
In a vampire foreclosure, although the foreclosure is completed, the bank doesn’t force the homeowner leave, so he or she stays on, living in the home. This can actually be a good thing for neighborhoods – the property is not vacant so it’s not a target for vandalism and the ex-homeowner takes care of the home (taking out the trash, maintaining the lawn, repairing broken gates, replacing front porch lights) which reduces community blight. And it can be good for the ex-homeowner too, allowing him or her to save up money to use for a security deposit on a rental home, pay down other debts, or otherwise improve his or her financial situation.
But some economists worry that keeping these houses off the market creates an artificially low inventory, which could inflate housing prices. Then, when all of these homes do hit the housing market , the increased inventory could deflate home prices. (To learn more, see Nolo’s article on Vampire Foreclosures.)