Zombie Properties: What Is A Zombie Home In Real Estate?

Zombie Properties: What Is A Zombie Home In Real Estate?

Zombie properties are considered fantastic opportunities by many investors. However, there are some that stay away from this type of property since there are a lot of circumstances that can turn it into a nightmare. 

If you are interested in investing in zombie properties, you found the right blog! Here, we will answer what are zombie properties and we'll look into finding them, their pros and cons, and more!

What Is a Zombie Property or Zombie House Foreclosure Process?

A zombie property, also called zombie foreclosure and zombie title is a property that is sitting vacant due to foreclosure. Usually, homeowners abandon their property when they receive a foreclosure official notice from the lender, thinking that they need to immediately move out. 

On another note, some owners just abandon their property after they defaulted or received a notice due to personal reasons to avoid foreclosure. What they do not know is that the lender or bank did not finish the foreclosure process and they are still named in the title as the owner.

Since the homeowners left the property, it will fall into disrepair and is then called a zombie property. This then can pose serious risks to various neighborhoods. Note that this is different from shadow inventory.

What are the Pros and Cons of Buying Zombie Foreclosures

Before you decide to find zombie properties, you should first weigh their pros and cons. This way, you won't waste time, money, and effort on the wrong properties.

Here are the pros of investing in zombies:

• Lower property values compared to those in the housing market because the houses are neglected and run down just like shadow inventory.
• The owners of zombie properties are motivated to sell since they have already moved on with their new life. They just want to get rid of their old dilapidated home.
• Everyone involved will benefit from the sale, not just you. The bank, the seller or original homeowner, and even the whole neighborhood would benefit from it.
• If the zombie property is situated in a good and thriving neighborhood (ex. in New York or Illinois), flipping it can provide you with a high return on investment.
• You find less competition in the housing market if there will be a bidding.

Meanwhile, here are the risks of investing in zombies:

• Zombie foreclosure refers to houses in disrepair that's why it is called as such. That said, the repairs needed may not only be cosmetic but structural due to a lack of maintenance from past homeowners. Imagine a house from Walking Dead. That's probably how worse it is. The costs of repair can be too expensive for real estate investors.
• The zombie foreclosure transaction can take longer to happen because there are a lot of legal processes you have to deal with.
• You should lock up the whole property and monitor it until you can make repairs so it doesn't pose a hazard to the communities. This also prevents the house from being used by squatters. This can happen to any property so be careful.
• It is hard to find a lender who will finance the sale and provide you with a mortgage.

How to Find Zombie Properties

If you have decided that investing in zombie properties is worth trying due to low home values, here are some of the lead sources and tips to find leads.

• Lenders: Your main source of zombie properties is the bank or lender since they are the ones who provide mortgage to homeowners. They also serve the notice of default. Ultimately, lenders have a list of foreclosed zombie homes or houses undergoing the foreclosure process that they can give out to real estate investors. From there, you can start your search.
• Local Authorities: Since some zombie foreclosures or zombie homes are too dilapidated that they can pose harm to whoever enters them, local authorities are usually monitoring them. Go to your local city council to ask who looks after the zombie foreclosures in your target area to find leads.
• Property Management Company: In some cases, zombie foreclosures are under the care of property management companies. Try your luck by contacting local property management companies in your target area.
• Driving for Dollars: Driving for dollars means driving around your target neighborhood to look for ideal vacant properties or zombie foreclosures. You can do this using a driving for dollars app for a higher success rate. 
• Buy Leads: The easiest way to find zombie foreclosure leads is to buy them from lead platforms. You can either buy motivated sellers or vacancy data or look for platforms that offer this specific type of lead. Some platforms can also connect you to mortgage lenders.

Aside from the ones listed above, you can also connect with real estate agents, tax authorities, and title companies for more zombie foreclosure leads or vacant properties under foreclosure.

How to Buy Vacant and Abandoned Properties (Zombie Properties)

Finding and buying zombie houses or foreclosure houses for sale is not an easy pursuit. Chances are, the house is involved in a lot of legal issues so the sale can stretch out to months or years.

Nevertheless, your very first move is to find zombie foreclosures through the sources we shared above. If you want a more straightforward way to purchase the property, just track down its former owner and buy the property from them. 

If there are too many complications involved such as title discrepancies, ownership, etc., you may want to work with a real estate attorney. Moreover, you also have to work with a title officer to discover whether the zombie foreclosure has outstanding liens and other legal ramifications.

Like we've said, this won't be an easy job so if you're a beginning real estate investor, consider other real estate investing options instead of foreclosure zombies.

Best Practices When Investing in Zombie Mortgages

Now that you've found a foreclosure zombie property, do you send an offer immediately to the homeowner? Not so fast.

You have to perform due diligence to ensure that the zombie houses for sale you found are actually legitimate and that the whole process runs smoothly. You can do this by digging into the history of zombie foreclosure, making a few phone calls and talking to title officers to ensure that you can buy the property from the homeowner, and more. 

After this, you may want to do a detailed home inspection to ensure that you can still salvage the zombie foreclosure and sell it to the market. Check if the HVAC, electrical, and plumbing are still in good condition, if the septic system is still working great, and if there are no structural issues. After which, have a professional estimate the repairs needed and ask for an appraisal so you can make a better offer to the homeowners of foreclosure zombies. 

Moreover, you have to prepare financially if you wish to succeed in buying and flipping the zombie foreclosure from its owner. Remember that the house is in bad shape and probably needs major repairs. Mortgage lenders are not keen on financing zombie properties or abandoned homes in various neighborhoods as it is too risky for them. That said, you have to have cash in your hands. Consider also the fee for the professional inspector, title officer to find liens of the homeowner, attorney, etc.

If, in case, the zombie property or foreclosure property you are interested in cannot be sold to you outright by its legal owner, you can ask that person to deed the property to you through a quit claim deed so you can get access to it and hold title when the time is right. Meanwhile, if you cannot track the previous owner of the property, you need to go through litigation to clean the property title. 

Key Takeaways: What Is A Zombie Home In Real Estate?

Zombie properties offer great opportunities for seasoned real estate investors, but for young bloods, not so much.

The process can take months or even years to complete because of possible legal ownership ramifications so it is not wise to embark on this type of real estate investing if you want fast cash.

Nevertheless, if you have bought and sold zombie foreclosures before, you may want to try out this investing niche. Just remember to prepare some cash as it is hard to secure financing or loan from banks for zombie properties.

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