Zombie houses: 300K+ in America


A survey by RealtyTrac reports that America is home to 301,874 zombie houses -- houses that have been abandoned by their owners, but not foreclosed upon by the banks. They effectively have no owners, but their erstwhile owners are theoretically on the hook for maintenance and liability. Florida has the largest zombie infestation (90,556!), followed by Illinois and California. Zombie houses are considered a blight because they attract vandalism and crime. In a rational world, neighborhood associations would be able to take these places over and turn them into community centers or shelters or some similar social beneficial purpose. Instead, they're just the subject of unending litigation that will likely only finish when the houses are razed.

Reuters revealed the plight of people who walked away from their homes not realizing that their names remained on the deed and that they were financially liable for taxes and other bills related to the abandoned property.

In some cases, homeowners vacated after receiving a notice from the bank of a planned foreclosure sale, only to find out later the bank never followed through.

Zombie properties can be easy to spot as they deteriorate into neighborhood eyesores and havens for criminal activity.

While Florida leads in volume of zombie properties, Kentucky, with less than 1,000 zombie properties, leads in percentage; zombies represent 54 percent of its total foreclosure inventory, Blomquist said.

Zombie foreclosures: 300,000 'undead' properties stalk ex-owners

(Image: Foreclosure, a Creative Commons Attribution (2.0) image from juggernautco's photostream)

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  1. There was one of these around the corner from me.  It was clearly getting to the point of being a flop house.  I was seriously getting close to being ready to do some unlicensed demolition work. Luckily a family moved in and have really cleaned up the place.

    I see these everywhere in Florida.  It’s funny many times someone maybe a neighbor will be keeping the place nice  and landscaped, but somehow you can still spot them.  Usually one or two extra newspapers, you can tell the garbage cans have not be moved in a long time.  The stains in the driveway start to bleach in the sun…

  2. You know, from the headline and image I thought this was going to be about a  company selling zombie-proof houses. I am disappoint :(

  3. I’d say the number 300k is too low.  My association has a good 10% of our houses that are zombies.  And for us, as the non-profit association to take over and at least maintain them or even better rent them out, it often costs more than we are able or willing to pay.  Especially since fairly often in the past the bank would suddenly decide to sell it after we have improved it from the state it was in.

    1. Thats why HOA’s have the power to forclose for non payment HOA dues.  It costs about $2,000 but either you end up owning the house free and clear or the bank will step in and forclose on the open mortgage take ownership and become legally responsible, for maintenance and dues.  The cost part sucks but the idea is to force the property to have a good owner.  

      1. Unfortunately you do not get it free and clear, at least in my state.  Condo laws vary widely from state to state.  I wish we had laws like Florida ones here in Illinois (I have family that runs one in Florida).  Here, while you can evict the residents for failure to pay fees,you simply are legal squatters, for lack of a better word.  The bank still retains the lein and first rights on the house, and thus once the owners stop paying on it or hte bank finally takes action, the bank can foreclose and boot us out.

        We have many properties we have done this on, but the ones I consider zombies are the ones where the owners trash the place then leave, leaving us wondering if it’s worth investing the $5k to file suit and fix the place up.  Usually it’s not.  Alternately, there’s the ones where the bank will refuse to acknowledge our suit and right to possesion and lock it up constantly (changing the locks 1/week and other childish tricks).  The zombie across from me, which was so unrentable that a homeless person said they would not stay there, finally is getting a foreclosure sale next week.  It’s been vacant for 2 years. 

  4. The people who lived in those houses – sometimes the victims of predatory lending – probably have a story to tell too. Where are they now? Renting? Bunking with family? What happened to their children? 

    1. Here on BB, ya kinda wanna think carefully about ringing the bell out of concern for ‘the children’.  The sarcasm rebuke is on a hair trigger.

  5. The Detroitification of America.  Although many of these are McMansions or other recent construction out in the distant exurbs.  Because old neighborhoods have a mix of people who bought before the bubble and people who bought during the bubble.  But newer developments don’t have any people who bought before the bubble and therefore have a higher proportion of upside down owners.

    1.  The picture being used above, however, looks like a standard Chicago bungalow to me, which were built specifically for working class families.  Good solid houses for a reasonable price….or at least they were, once upon a time.

    2. Detroitification is a good name for it. I’ve been telling people since the early ’80s that if we let them get away with doing what they did to Detroit, sooner or later they’d do it to the rest of us. And they did.

      America has done things like this to successful middle class black families every 5 to 10 years since the Civil War. What happened starting in 1973 is that working class white families found out, slowly, that they were no longer “white” in the eyes of the law, that they no longer had any rights that they were entitled to have protected. After the junk bond and dot-com scams, an awful lot of middle class white familes found out that they were no longer white, either. After the subprime CDO bubble, now even a lot of upper-middle class whites are no longer white. Pretty soon the couple of hundred upper Richistanis and maybe a few tens of thousands of middle Richistanis will be the only people left in this country with any expectation that they’re entitled to legal protection for their savings or investments or their livelihoods, and all the rest of us will live in Greater Detroit.

      When I was growing up, my teachers told me: watch how someone treats the powerless, because if they get power over you, that’s how they’re going to treat you.

  6. What’s the best about this: I’m sure it’s like the Case Shiller numbers…condos don’t count, so it’s MUCH higher than that.

  7. the banks own these houses.  they are responsible for this mess.
    the homes should be taken from the banks by the respective cities/counties, sold at auction and the funds used for parks, etc..
     at a minimum, the banks that own these houses should be fined for every day that the house sits there ugly and unkempt.

    1. These banks are exacerbating the decline of neighborhoods by neglecting upkeep. BofA and some others have been accused of discrimination for neglecting upkeep of properties in minority neighborhoods while at least making some effort in white communities. Discrimination from start to finish. It’s all very despicable.  All these banks should have been seized by the state and eligible homeowners should have been bailed out instead.

      http://realestate.aol.com/blog/2012/10/24/bank-of-america-discrimination-complaint-foreclosures/

      1. Palm Springs is a business ghost town and has been since I moved here in 2000. There are many businesses on the main street that have been vacant for more than a decade because the owners won’t rent for less than ten times the market value and prefer to just sit on empty property. I really think that municipalities should start fining owners for holding empty buildings in areas like that. Any of them could have offered low-risk, month-to-month leases for non-profits to use them as offices and kept the downtown area from looking like the twilight zone.

        1. Or eliminate tax deductions for lost income on vacant properties. If I’m not mistaken, they get to claim losses equal to market-rate rent plus cost of upkeep. Kill that and all motivation to sit on empty rentals goes away.

    2.  In many cases, they don’t.  As the article said.  Or the ownership is so complex even the bank doesn’t know who really owns it once they divided up the interest and sold it off in penny packet lots.

    3. the banks own these houses.

      You missed the whole point of the article.  The banks never took title to the properties, so they don’t own them.  The “former” owners are still the owners and still responsible financially and in terms of liability.  Eventually, they’ll go to a sheriff’s sale for taxes, but the former owners can still be pursued to the grave and beyond for that money.

      1. Yep. And, even more twisted than that, since the foreclosure auction was canceled at the last minute, the homeowner still owes on the original mortgage, which will also haunt them until they die.

  8. Blight houses should last no longer than a year, counties and cities have the ability to take ownership and auction after the house fails to pay property taxes.  So much if this is people not taking action.  Banks, cities, counties even in some cases HOA’s can force something to happen.  The real problem is if there is no rental market or market of people wanted to buy the units there is no incentive to push the process.  I can’t believe we don’t have people that want a home.

    1. You’ve been playing too much early SimCity, where it only cost $1 to demolish a lot. Cities don’t want to take these over because it costs more to haul off the wreckage than the land is worth. My hometown, St. Louis, got some grant money a while back and went on a demolition spree, put a small dent in the problem, but then the grant money ran out.

    2. It’s more about not having people who can afford a home.  Not to mention that unoccupied houses can quickly become unlivable due to squatters trashing the place and/or thieves stripping out wiring or plumbing.  Then you have the problem of having to demolish the house, as that becomes the cheapest option, which, as pointed out, can still be too expensive.

    1. And an estimated 1.3 million empty houses, plus uncounted empty apartments. Yep. That this isn’t considered a scandal is, to me, a scandal: it would cost exactly zero dollars and zero cents to house every homeless person in America; they sleep outside and die in alleys and under overpasses because we’re trying to kill them.

      1.  How many have you invited to live in your home then?  You’re pretty free with other people’s property though.

        Zero dollars?  I rather think not.  Far too many people will take zero care of something they have no stake in and do not pay for.  Water and power and heat are not handed down by archangels.

        1. Can we assume then, James, there are none among your family, friends and acquaintances who qualify as *working* poor?

        2. Lots of them, actually. I was kind of famous for it, for a while. But that’s not the important point, that’s a special case. The broader, more important point is: have YOU seen how fast an empty house deteriorates? With no one there to call the cops if vandals or copper thieves break in? With no heat on in the winter? With nobody to report, let alone fix, any leaks that happen?

          A house that sits empty for over a year is probably a major rehab job, at best. A house that sits empty for two years is probably a gut rehab. A house that sits empty for three years is probably a tear-down. So how bad do you expect people to tear one up, compared with that?

        3. “Far too many” maybe, technically, as 1 person would fulfill that condition, but how does it follow that you let your domicile fall apart just because you’re not paying for it? That roof is still leaking onto your bed, and that toilet is backing up all over the bathroom floor that you walk on, you think people would rather be ankle-deep in sewage than put in some effort to be not-ankle-deep in sewage?

          (By the way, water and heat are handed down by angels every time it rains or the sun shines.)

      2.  Are you serious? Have you ever rented a room or property to another person? I assume not because you’d know how poorly they treat your property when they actually are paying. I can only imagine how quickly these places would be ruined if people were living there rent free.

        1. …you’d know how poorly they treat your property when they actually are paying. I can only imagine how quickly these places would be ruined if people were living there rent free.

          That is so barren of logic.

        2. The residents of almost every squat I’ve ever set foot in have more sweat equity invested in their homes than any legitimate renters. Calling their situations “rent free” is disingenuously simplistic; if you were to pay going rates to the guys hanging out outside the Home Depot (never mind licensed contractors) for the equivalent labor that principled squatters* do, they could more than afford to live there too. 

          * Real squats have almost nothing in common with the crackhouses I suspect you’re imagining.

  9. I’m glad to see this getting more coverage, but Reuters broke this story a couple of months ago: http://www.reuters.com/article/2013/01/10/us-usa-foreclosures-zombies-idUSBRE9090G920130110. Planet Money covered it, too, I don’t have that link handy.

    What you’re missing from the CSM article is just how this worked and what was in it for the banks. What was in it for the banks was that a lot of them had insurance on these loans that kicked in as soon as the court date for the bankruptcy was filed, that didn’t require them to go through with the bankruptcy in order to collect. So they came up with the perfect scam: trick the insurer into covering their loss on the mortgage by filing the bankruptcy, then cancel the bankruptcy to get out of being stuck with a property that was worth less than the maintenance and property tax costs.

    Not only were the homeowners not told, they were put in a Catch 22 situation: if they waited until the court order to move out, they wouldn’t have enough time to secure new housing, box up their stuff, and move. So most of the zombie homeowners, having been told that there was no way for them to beat the foreclosure and having been (falsely) told that the sheriff would be there to evict them as soon as the court order came down, chose not to risk losing all their personal property on top of losing the house and made sure to move out before the court date. Most of them didn’t find out about the canceled foreclosure hearing until the cities tracked them down, at their new address, for the code violations and back taxes — YEARS later. By which time there was no plausible way to move back; copper thieves and vandals and meth cooks and random homeless people had trashed the places beyond any plausible repair.

    In a saner world, filing foreclosure just to collect the insurance money and then canceling the foreclosure would be classified as felony insurance fraud. Sadly, we live in 21st century kleptocratic America instead of in that better world.

    1. Was his name actually ‘Joseph Keller’ (similar to, yet not the same as, the name of the author of ‘Catch-22′), or are they funin’ us?!  Oh, that’s rich.

      Well done, Brad.  And the insurance companies pass on the costs in higher premium rates?  Who insures the insurers?

      1. None of the reporters who’ve covered this have taken it that far, but given how many re-insurers’ counter-parties were bailed out by the US government, my guess is that it got passed along to the taxpayers and just bolted onto the deficit.

        If my guess is correct, then it probably ended up costing the taxpayers as much as it would have cost to grant mortgage relief to the original homeowners. But if we had done that, we wouldn’t have all these great homeless people or all of these wonderful derelict houses, and who would want that?

  10. >  In a rational world, neighborhood associations would be able to take these places over and turn them into community centers or shelters or some similar social beneficial purpose.

    The house is eventually going to be owned by the bank.  Unless those neighborhood associations are willing to buy it, trying to fix up an old house for some other purpose is a waste of time and effort.

    In a rational world we wouldn’t have crazy housing price bubbles and crashes that cause this problem in the first place.

    1. The house is eventually going to be owned by the bank.

      No, it isn’t. Did you read the article?

  11. ‘Zombie properties are easy to spot as they deteriorate in to neighborhood eyesores and havens for criminal activity.’

    My neighbors created a bit of scandal by being away for much of four months in the summer and only keeping up their yards when and if they got around to it.  They did not hire a yard service.  The grass grew tall; the rock flower beds became weedy.  I thought our HOA ‘landscape committee’, standing out on the sidewalk with their clipboards, were going to pass out from horror.  For them, the words ‘eyesore’ and ‘criminal activity’ were interchangable.

  12. Also, I feel like this Sinfest strip, from the middle of the worst of the crisis, should be bolted onto any discussion of banker malfeasance: “It Feels Good to be a Bankster” http://www.sinfest.net/archive_page.php?comicID=2952

  13. There’s also a fun category of ones where the paperwork for who owns the mortage and the like has been shuffled around so much that it’s actually impossible to even identify who the actual owner of a given house is.

  14. I like how capitalism is regulated with the nation’s fisheries: you get to compete as much as you want with the other boats, but when the enough fish are taken, the season is closed.

    How is it that we can accept a finite profit from the seas, but housing is somehow regarded as a bottomless well of money?

    When a ponzi scheme crashes, you either outlaw the fraud, or grow another crop of eventual victims.

    1. From my favorite movie, Key Largo:

      Johnny Rocco: There’s only one Johnny Rocco.
      James Temple: How do you account for it?
      Frank McCloud: He knows what he wants. Don’t you, Rocco?
      Johnny Rocco: Sure.
      James Temple: What’s that?
      Frank McCloud: Tell him, Rocco.
      Johnny Rocco: Well, I want uh …
      Frank McCloud: He wants more, don’t you, Rocco?
      Johnny Rocco: Yeah. That’s it. More. That’s right! I want more!
      James Temple: Will you ever get enough?
      Frank McCloud: Will you, Rocco?
      Johnny Rocco: Well, I never have. No, I guess I won’t. You, do you know what you want?
      Frank McCloud: Yes, I had hopes once, but I gave them up.
      Johnny Rocco: Hopes for what?
      Frank McCloud: A world in which there’s no place for Johnny Rocco.

  15. Not a new thing..in the late summer/early fall of 99, I stayed in a three story brownstone squat in West Philly..on West Buckingham Avenue if I recall correctly..a band that rented a place across the street maintained it..we kept the front door locked, but the entrance was two feet high with mail (fascinating pile actually, hundreds of people had used that address and the squat) and unoccupied. One of the band members had a love pad on the 2nd floor, and I was able to use the top floor for two months. Electricity was live but the water was off.  Apparently there were many such places in the city, but the locals had no qualms about using them. The city would stop by once in a while but never kicked anyone out. 

  16. I have a friend who fortunately talked to everyone she knew — and everyone they told her to talk to — and the end result is that she learned to NOT move out until she was certain the auction of her home was actually going to happen.

    This required her to pack up almost everything, to be ready to move in a matter of days when the time comes; move as much as possible to friends’ basements and garages, for the same reason; call every Monday (for 9 months now) to find out if the house was listed for auction that week; and  keep an eye on the rental market, to know what her options are likely to be when the time comes.

    That is a lot to keep track of while trying to work several jobs and live your life, just because you missed two mortgage payments while going through a nasty divorce.  But if she hadn’t gotten the right advice, she wouldn’t have even known this was possible.

    1. Maybe we need a federal law mandating 30 days between transfer of property and eviction. And also requiring that an entity that evicts must also take title or have no standing to pursue an eviction.

  17. The banks really just don’t want to foreclose.

    They send scary letter, do all kinds of stuff, but the reality seems to be that unless the property is worth owning, they’re not going to foreclose. They’re just going to walk away.

    My mother-in-law moved out of her house and stopped paying her mortgage. (Combination of medical and financial issues.)

    Roughly two years later we finally got the bank (Chase fronting for Fannie Mae) to do a “deed in lieu” title transfer to get her off the taxes and the water bill. We actually had a short sale offer but they demanded twice that offer, and ultimately sold for $10K more than the offer.

    There needs to be a process for walking away from a house that actually results in someone owning it. Maybe register it with the county that you intend to walk away. The county gives notice to any lien holders, and if they make no effort within 90 days to secure their interest (or if they ultimately fail to follow through on the foreclosure) the property’s ownership transfers to the closest governmental unit. If you live in a city, it’s the city. If you’re outside city limits, then the township, or the county if there is no township.

    It’s plain and simple contrary to public interest to have properties essentially without owners for years until a government unit either condemns them or seizes them for non-payment of taxes. 

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