Zombie Foreclosures Back From The Dead In 2015
By JD Esajian on April 20, 2015
Zombie foreclosure sightings are being reported all around the U.S. in 2015. So where are they coming from? What do thousands of new distressed foreclosure properties in the market mean for American real estate investors, home buyers and homeowners?
Foreclosures Back from the Dead
The mainstream media has been doing a stellar job at heralding the revival of the American real estate market. However, jobs and earnings may not be where we want them. Some would like to see economic growth rising at a more furious rate. Overall, the situation is far better than five years ago.
Southern California news media, in particular, has been proclaiming the end of foreclosures and distressed property for quite a while. In turn, some Realtors and investors have complained there has been a lack of viable inventory. There has been very little talk about ‘shadow inventory’ recently. A resurgence in foreclosures shows that shadow inventory hasn’t been wiped out yet.
However, at the end of the first quarter, a number of local sources picked up on a resurgence in zombie foreclosure properties. Some may squabble over what this term actually means, but it can incorporate homes that have been in foreclosure limbo for years, abandoned and run down properties, and more recently properties that owners thought were repossessed, but haven’t been yet. From New York, to Chicago, to Charlotte, to Orlando, and Southern California, local journalists are reporting these distressed properties as still a problem in 2015.
The Real Deal on Foreclosures in 2015
Foreclosure activity may now be far less than it was from 2007 to 2010, but to say it isn’t happening any more wouldn’t be accurate. RealtyTrac reported that 1 in every 1,295 housing units in the United States was in some state of foreclosure in February 2015. This ratio gets as high as 1 in every 564 housing units in Maryland. Mineral, NV has 1 out of every 83 housing units in foreclosure.
The Top 5 States for Foreclosure in 2015 (RealtyTrac):
- MD
- NV
- FL
- IN
- ID
While all types of foreclosures may be down since last year, February saw a spike in pre-foreclosures and bank owned REO. On a state, county, and zip code level some areas have experienced triple digit increases in foreclosures in 2015. Nevada pre-foreclosures are up over 153%. Bank data compiler DistressedPro reports that there are still billions of dollars in defaulted real estate loans and REOs on bank books.
No one wants to disrupt the comfort bubble that high level media has been building. These foreclosures don’t need to be a source of fear. But ignoring them, or pretending they don’t exist isn’t going to help anyone. It is not going to help individual homeowners, neighbors, the county, or the nation. They need to be addressed, or communities where they are dense will suffer. The responsible thing to do is to educate individuals, alert lawmakers, help investors recycle these properties, and provide some type of fresh start to individuals.
The New Foreclosure Pool for Real Estate Investors
This resurgence of foreclosure properties can be great for real estate investors. There may be fewer of them in some neighborhoods. But on a national level there are plenty to pick from. Some need a lot of work. Some may even need to be torn down and replaced, or re-purposed. There can be incredible profits and wealth to be found in buying, improving, and renting, or reselling distressed properties. There can also be a wealth of rewards for others. Every home that is bought, fixed up, and occupied, helps the financial stability of the nation, helps cities and counties, helps communities and neighbors, and make a huge difference in the lives of the residents. This is important work. And it can pay well too.
The key is finding these properties. They can be found:
- From banks and credit unions as REOs
- In the form of non-performing mortgage loans
- As pre-foreclosures and short sales from Realtors
- Directly from motivated sellers
- From real estate wholesalers
For Home Buyers
The presence of these properties can be great for home buyers too. Some may choose to go to the extra lengths of hunting down these homes to find bargains. Or at least cheaper properties. Others can at least benefit from the hard work of investors. Investors find them and fix them. This enables home buyers that don’t have cash, and don’t have the time or expertise for rehabbing to finance a great freshly renovated home.
For Homeowners and Sellers
Unfortunately, this raising of zombie foreclosures isn’t as good for struggling homeowners and sellers. Neighboring foreclosure homes can compete. If they are in poor condition they can even drag down the value of your home. The longer you wait to sell; the lower it can go. If you need to sell, do it fast. If you want to stay; look for a way to restructure your finances to make your home more affordable. You may even find investing in real estate a great way to boost your income.