Photo by Daniel Tuttle on Unsplash
Buying a home, especially for the first time, might feel a little scary—notably if you've learned the home you’re considering for purchase is a zombie property. Even a pro at buying property may flinch when they initially hear this term.
No worries, a zombie property is not as frightening as it sounds. It’s a common term used in the housing industry, originating back to the 2007-08 housing crisis when tens of thousands of these homes were left behind because their owners couldn’t afford to make their mortgage payments.
A zombie property creeps up when no one retains accountability for it. It usually occurs when homeowners leave their homes after receiving a foreclosure notice and incorrectly believe they must immediately vacate the property. They often don't realize there is an entire foreclosure process, one that doesn’t happen overnight. In most instances, they believe the lender that sent the notice will take over responsibility for the property, so they move out. In some cases, they do know they can stay but choose not to delay the inevitable and cut loose in search of greener pastures.
Meanwhile, the lender, for whatever reason, doesn’t complete the foreclosure process they initiated and the property stands abandoned. Since the homeowner has already walked away not realizing they still technically own the property, and the lender also doesn’t assume ownership, no one takes responsibility for the home. It essentially sits in a state of limbo—hence it being referred to as a “zombie.” Its ownership is not quite alive (abandoned), but not yet dead (foreclosed upon) either.
The primary benefit of purchasing a zombie property is the price. Most of these properties are typically sold below market value, sometimes at rock bottom prices. Because some of them are eyesores, or have the potential to become attractive to squatters, municipalities and towns are eager to get these homes rehabbed and inhabited. This means buyers who are handy with repairs or who have the investment money available to fix up and flip the home for a profit can make out handsomely with this type of sale.
While the financial benefits associated with zombie homes are lucrative, there are some potential pitfalls to be careful of when considering a purchase. In most instances, the original owner still retains the title to the home, so this legal detail will need to be addressed. Buyers also have to consider these homes may have deterioration, unsafe conditions or be unsanitary. This is especially a concern for properties that have been abandoned for a long period of time. Additionally, it takes more effort to navigate a zombie property purchase than a traditional foreclosure since no one is actively involved with the property.
Many potential buyers intentionally or inadvertently overlook zombie properties, but if you’re in the market, it’s not an option you should automatically discount. Don't let the zombie moniker fool you. If you perform your due diligence and find ways to mitigate any drawbacks, you could potentially land yourself a great home, rental investment, or profitable house-flip.
Rebuilding the Economy One Home Sale at a Time
Gary has been in the Real Estate Business since 2005 and can be considered a seasoned Realtor. He has seen the down periods in the economy and the upward trends that we are experiencing recently. Through it all there has always been one unchanging need in our society: families want to purchase homes. And when they are ready to buy they need assistance to search through today's over-saturation of information released by our industry. In order to find that perfect home it can become a journey that requires perseverance and patience. And a seasoned Realtor can be the guide to assure a successful transaction from start to finish.
