NEW YORK (MainStreet) — One in five homes in the foreclosure process are zombies, according to RealtyTrac which says that Florida leads the list with maybe 55,000 homes that are abandoned by their owners and in a legal limbo.
Illinois, New York, New Jersey and Ohio also have plenty.
It’s a problem that - despite an economic recovery in much of the nation - is not going away. In fact in 14 states, per RealtyTrac, foreclosures are up year on year and wherever there are foreclosures there are zombies.
Zombies suck the life out of nearby real estate.
If there’s one on your block, you probably can’t sell your home and if you do, you will get much less than you had hoped because you are near the house from hell.
Zombie foreclosures happen when a lender goes through all the steps of a foreclosure except for the last which is registering the deed that moves title from the borrower to the lender.
Read More: Zombie Debt Can Track You Down
A zombie home is an eyesore, usually. Nobody cuts the grass. Nobody fixes the leaking roof. Nobody boots the occasional squatter out. Frequently there are vermin. Possibly a feral cat colony. In much of the south, the lawns are homes to countless snakes. In Arizona, the homes may hide innumerable scorpions and tarantulas. A zombie home is ugly, usually it’s a health hazard, and it may also be a fire trap.
The reason for this pervasive disrepair is that the home lives in a twilight zone. Most towns have laws on their books that let them perform emergency repairs on a home and then bill the owner. But the former owner long since fled the scene of a zombie home and even if he lives across town, typically he doesn't have the money to repay the city.
Can’t the government go after the bank? In most cases, nope. Remember, the bank never filed a new deed. Technically it does not own the abandoned home. It did this on purpose, precisely to duck covering upkeep on a home it knows will be hard to sell in a sluggish market.
So cash-strapped cities sit on their hands and watch zombie homes rot.
“Zombie foreclosures are probably the biggest problem many towns are facing,” said New Jersey lawyer Albert Marmero.
You don’t find zombie homes in Beverly Hills or Manhattan. In cities with torpid real estate sales - down on its heels Camden, N.J., for instance - banks see no percentage in taking ownership of a home that needs repairs to be up to code and that will likely languish on the market for months, even years, meaning there will be thousands of dollars spent on upkeep.
Even New York City has zombies. RealtyTrac numbers show 3,700 zombies in Queens and Long Island.
A vicious circle may also kick in. According to a report by the Washington, D.C. based Center for Public Integrity - which has documented how zombies have strangled Jacksonville, Fla. - “Zombie homes can haunt homeowners for years and have a negative impact on neighborhoods and cities.”
As Maria DeGennaro, Long Island regional coordinator for the Empire Justice Center, told the New York Post, Zombies are “hurting not just homeowners, but anybody living in the neighborhood, and it’s a terrible spiral.”
Some cities and states now are fighting back. Oakland, for instance, has passed a law that requires a lender to enter a home into a blight database when it sends the owner a notice of default. That typically happens many months before foreclosure.
Banks are also required to hire a property manager.
In New Jersey, the legislature recently passed The Creditor Responsibility Law which allows a town to hold a lender responsible for upkeep of a home that falls vacant in the foreclosure process. According to the Housing and Community Development Network of New Jersey, here’s the impact of the law: “If at any point after the foreclosure proceeding has begun the local government finds that the property has been abandoned by its owner, responsibility devolves to the creditor. At that point, if there is a nuisance condition or a code violation on the property, the appropriate municipal official may notify the creditor, who must ‘abate the nuisance or correct the violation in the same manner and to the same extent as the title owner of the property, to such standard or specification as may be required by State law or municipal ordinance.’”
Bankers are not taking this lying down. Beth Mills with the California Bankers Association, for example, commented thusly on the Oakland law to the San Francisco Chronicle: "You're asking us to come in and maintain homes that legally aren't the bank's property yet.”
That is: we do not own it, so we are not responsible.
Exactly how this will play out - expect legal challenges in Oakland as well as New Jersey - is far from determined.
Just accept this: zombies are as hard to kill in real estate as they are on television.
But zombie homes inevitably will kill the homes around them.
--Written by Robert McGarvey for MainStreet