Everyone has heard their fair share of Real Estate horror stories. A zombie title is a nightmare that creeps up on homeowners going through foreclosure.
Read more to learn about what a zombie title is, how it affects homeowners, buyers, and even neighbors, and how you can avoid being stuck with one.
What is a zombie title?
A home title becomes known as a zombie title when the bank decides to cancel the foreclosure process on a home after the homeowner has moved out. Now, why would a bank back out of a foreclosure?
There’re many reasons a bank would fail to follow through on a foreclosure. It could require too much money and work to get the home to a place where it’s profitable. So, the bank will back off and may not even inform the homeowner who could’ve potentially moved out already.
Why is it a problem for homeowners?
The biggest problem with a zombie title is that the home can remain vacant for a long time, but the homeowners still owe taxes and are responsible for the upkeep.
This time frame the home is vacated leaves it open to neglect, vandalism, squatters, and even potential fraudulent schemes. Even if the homeowner is unaware that they still own the home, they can be held liable for whatever happens to it.
Fraud is a big problem. Scammers scout out properties that have fallen through the cracks of the foreclosure process. These scammers pretend to be the new owner and attempt to take out a loan on the property, or they try to sell the property even though it doesn’t belong to them.
There goes the neighborhood
Zombie titles can have a negative effect on the neighborhood it’s located in. Neglected properties become eyesores and impact the curb appeal for the surrounding neighborhood. This could lower the valuation of a property in the neighborhood that is appraised for a refinance or sale.
Without a clear owner, they tend to remain unmonitored. The home could become a magnet for squatters and illicit activity. As if the other concerns weren’t problematic enough!
How can I avoid it?
If you’re going through a foreclosure, make sure you stay on top of the status of the home, even if you’ve moved out.
If you’ve experienced an unusual parting with a property, get professional assistance. Find out the status of any past title before you’re surprised with bad news.
Buyers should also be informed of the title history of a property. Do a title search and have a title insurance policy.
Title insurance protects a buyer by verifying that the owner attempting to sell a property has a legal right to do so.
Be educated on the subject matter. Pay close attention to the title history on a property before purchasing/parting ways with a property.