DS News - Digital Archives

» VISIT US ONLINE @ DSNEWS.COM COVER STORY MARKET PULSE MARKET PULSE Vacant foreclosures pose risks and challenges to investors, servicers, and their partners in the field and can have devastating effects on local communities. By Georgie Palafox INDUSTRY INSIGHT W e all know the devastation that vacant homes can inflict on our communities, from inviting crime, vandalism, and other sordid neighborhood activity to wreaking havoc on tenuous area property values. That alone is reason enough to curtail periods of vacancy for the still-burgeoning population of soon-to-be foreclosed properties choking. And then, add to the equation that firsthand anecdotal evidence and incontestable statistical data clearly documents how beneficial it is to solidifying recovery when foreclosures run their course (and quickly). This scenario is more common and more widespread than many are aware of, and it's giving way to a pseudophenomenon that's been termed "zombie foreclosures," feeding off of unsuspecting absentee homeowners and banks whose hands are tied with bureaucratic red tape. Zombie foreclosures are properties abandoned by the homeowner once notice of default is served. Foreclosure proceedings have been initiated but not completed, leaving the runaway homeowner legally responsible for fees incurred, property taxes, and maintenance costs. ng in jurisdictions across the country—particularly judicial states—the problem is only getting worse. Once the homeowner leaves, it's generally likely that the property will not be maintained, which can lead to code violations. Empty homes are like an open invitation for vandals, criminals, and even squatters. And on top of that, unpaid real estate taxes begin to pile, as do homeowner association fees and other housing-related costs. Before long, this situation has snowballed into a whole new set of even bigger problems—problems that the homeowner can still be held liable for despite the fact that they aren't present and have probably already washed their hands of the place they used to call home. Former homeowners are stunned when they're billed by the city or their mortgage company for pastdue homeowner association (HOA) fees, or in the worst cases, for graffiti-cleaning services, appliance replacement costs, or demolition crews. An already unpleasant situation for the homeowner can quickly turn worse should the foreclosing lender or investor decide to rightfully invoke wage garnishments or intercept their tax refund. POINT— COUNTERPOINT The Monstrosity Takes Form THE BIG PICTURE These aren't edifying revelations— they're innate market realities that property preservation specialists and their servicer clients see played out almost every single day. But when there are still i's to dot and t's to cross before a final foreclosure judgment is rendered, those working in the field risk a trespassing charge if they take control of maintenance before "ownership" reverts back to the investor or lender. Zombie Apocalypse A national study conducted by RealtyTrac found 301,874 zombie foreclosures caught in pipelines across the United States. That tally equates to 35 percent of all properties in foreclosure. As Shari Olefson described it in a DSNews.com article published in late March, both the homeowner and 55

• Cover