Most investors don’t know how to buy zombie foreclosures, let alone know what they even are. If for no other reason, zombie foreclosures are often overlooked, and rightfully so: zombie foreclosures are much less common. It’s worth noting, however, that their rarity shouldn’t deter any prospective investors. While there may not be as many zombie foreclosures as there are traditional ones this Halloween, there are still plenty for investors to take advantage of. What’s more, those that have the wherewithal to navigate the zombie foreclosure process could find themselves with some of today’s best deals. If that’s not enough to convince you to learn how to buy zombie foreclosures, I don’t know what is.
Before you even learn how to buy zombie foreclosures, it helps if you understand where they come from. If for nothing else, those that have a firm grasp on exactly how a zombie foreclosure came to be will be in a better position to buy one down the road. So before you jump headfirst into your first zombie foreclosure, how about a little background on the subject?
The aptly named zombie foreclosure is exactly what you would assume: a foreclosure that refuses to be put to rest — sort of. While you won’t literally see zombie foreclosures wandering the streets this Halloween, they do have a tendency to linger on the market longer than their traditional foreclosure counterparts because of their owners’ inclination to abandon the property once the foreclosure process has gotten underway. You see, a zombie foreclosure is essentially a home in limbo; it has been subjected to the foreclosure process, but never completed it for one reason or another. What’s more, the owner (who has already moved out of the home at this point) is unaware that the title is still under their name. In the end, you have an abandoned home that belongs to someone that doesn’t even realize they own it anymore.
It’s not uncommon for some owners to pack up and leave their property once they are given word that the bank is going to foreclose on the home. More often than not, they simply assume the lender will kick them out eventually, so they figure they will get a head start. It’s worth noting, however, that there are many reasons a foreclosure may not be seen through to the end. For instance, the lender may not be in a position to assume responsibility of the subject property. Remember, banks aren’t in the business of holding on to properties; it actually costs them money to repossess and hold. Sadly, there’s also a chance the paperwork simply gets lost. Whatever the case may be, there are plenty of reasons a foreclosure may be canceled. Meanwhile, the home sits stagnant as debts continue to amount under the original homeowner’s name.
Not surprisingly, zombie foreclosures can lead to terrible consequences for unsuspecting homeowners. Seeing as how the title was never officially transferred out of the homeowner’s name, he or she is still responsible for a number of debt obligations: Property taxes, HOA dues and maintenance fees are just a few examples. Each of these debts, and more in many cases, may continue to add up without the homeowner even knowing about them, for years, nonetheless. What’s worse, the unsuspecting homeowner will be held responsible for the debt obligations they unknowing accrued. To make matters even worse, their credit report won’t be spared; in addition to being hit by a foreclosure, their credit score will fall due to unpaid debts.
All things considered, there are a great deal of motivated sellers out there that don’t even realize the situation they are already in. And therein lies the secret to why investors need to learn how to buy zombie foreclosures: their owners may be more motivated to sell than anyone you ever come across.
Now that you have a better idea of why investors should consider looking into zombie foreclosures, let’s briefly touch on how to go about buying them.
If you want to learn how to buy zombie foreclosures, there is no better place to start than by talking to a title officer. After all, title issues are the primary reason a home ends up being called a zombie foreclosure in the first place. Since the homeowner may not have even realized the title was still in their name, it’s in your best interest to see if there are any other title discrepancies.
Before you even consider buying a zombie foreclosure, hire a title officer to perform a title search. That way, you will have a clearer picture of what lies ahead, and, most importantly, if there are any additional liens attached to the property or owner. In the event there are additional liens, you will need to deal with them accordingly.
Since learning how to buy zombie foreclosures requires legal recourse, I maintain that investors going down this path seek proper legal guidance. That said, the following information is not legal advice, but rather a short synopsis of what one could expect should they decide to buy a zombie foreclosure. For a better idea of what to expect, please speak to a lawyer well-versed in this particular area.
Some investors may need to pursue litigation in order to make sure they acquire the property free and clear. And since there are already most likely title discrepancies leading into an impending purchase, interested parties may need to file a lawsuit to determine who owns the real estate in question. Otherwise known as quiet title action, said litigation is intended to “quiet” any disputes that may arise over the title in question.
According to NOLO, a “quiet title lawsuit names as defendants anyone who might have an interest (including descendants — known or unknown — of prior owners).” What’s more, “notice of the action must be posted on the property and published in an approved local newspaper,” as to give the title holder a chance to come forward. Finally, “if the court rules that the plaintiff is the rightful owner, it will grant a quiet title judgment, which can be recorded and will settle the issue of ownership,” says the publisher in Berkeley, California. Pursuing said litigation will enable investors to take the appropriate actions to purchase the property legally.
Worth The Effort
Learning how to buy zombie foreclosures is considered by many to be a complex, sophisticated strategy. The process is extensive and involves a lot more than your standard foreclosure property acquisition. However, not unlike their traditional counterparts, purchasing zombie foreclosures can benefit just about everyone involved. Perhaps most importantly, investors that know how to navigate the entire process could find themselves with a great deal on their hands — one that is well worth the time it took to get it in the first place.