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Zombie-Foreclosure Properties Are Rising, Here’s What That Means For Homebuyers

Zombie-Foreclosure Properties Are Rising, Here’s What That Means For Homebuyers
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Home.com Staff

As if the housing market wasn’t scary enough, the number of zombie-foreclosure properties is rising for the first time in nearly a year.

A home becomes a zombie property when the owner vacates during the foreclosure process and, for one reason or another, the foreclosure process isn’t completed. The title remains in possession of the homeowner who may or may not realize that they are still financially responsible for it.

This misunderstanding can leave a home vacant for months or years and create problems for the homeowner, lender, and neighborhood.

Why are zombie properties on the rise?

The number of zombie properties rose 2.8 percent from the first to second quarter, the first increase since the federal foreclosure moratorium was lifted in July 2021, according to ATTOM Data Solutions. Even with the increase, the roughly 7,500 zombie properties make up just 1 in 13,171 of all homes.

Rick Sharga, executive vice president of market intelligence at ATTOM, attributed the recent rise in zombie foreclosures to owners that were in default prior to the federal moratorium, and have now entered back into the foreclosure process.

The following metros with at least 100,000 residential properties had the highest rate of properties in the foreclosure process that were also vacant:

  • Peoria, Ill.: 11.3%
  • Wichita, Kan.: 11.2%
  • Cleveland, Ohio: 9.5%
  • Syracuse, N.Y.: 8.9%
  • South Bend, Ind.: 8.6%

Related reading: How to Find Cheap Houses: 6 Ways to Find a Home for Under $200,000

Are zombie properties available for homebuyers to purchase?

After record price growth in the housing market, many homebuyers are looking for affordable alternative paths to homeownership. While it’s technically possible for everyday homebuyers to purchase zombie properties, it requires substantially more risk and legwork than a traditional home sale.

To begin with, the property by definition has been sitting vacant, perhaps for months or years. Most require a substantial renovation, the cost of which can vary by the level of deterioration. That’s not to mention the possibility of liens against the title and other expenses.

Second, there isn’t exactly a “zombie property” tab on Redfin and Zillow. Just finding a property requires additional legwork and may require reaching out to lenders to find a list of foreclosed properties. And remember, there are just over 7,500 properties in zombie-foreclosure, so they’re quite rare.

Finally, tracking down the owner and buying the property is an entirely different process than a regular home sale. It often requires working with a title officer, real estate attorney, and/or property management company to get information about the property and may require litigation* in order to purchase it.

Overall, buying a zombie property requires much more time and attention than a traditional sale, and is typically pursued by investors and home flippers. However, the end result can be mutually beneficial if the homebuyer gets a home below market value, the previous owner shakes off the foreclosure on their credit report, and the neighborhood gets an upgraded home instead of an eyesore.


*This article does not constitute legal advice.

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