Foreclosure Zombies

Even as the housing market recovers and prices improve, a potential threat is appearing:  “zombies.”  Foreclosure zombies are created when a bank files for foreclosure on a property, but abandons the foreclosure process at some point which leaves the property in limbo – vacant but not for sale.

This comes at a time when many markets are dealing with inventory shortages and multiple offers.  Analysts expect the zombies to come onto the market, along with other currently delinquent properties, in the second half of 2014.

Florida has the highest number of unoccupied foreclosure zombies, 55,503 according to RealtyTrac.    There are approximately 167,000 zombies across the country.   And this does not include the hundreds of thousands of properties still going through lengthy judicial foreclosures or those REOs not yet listed for sale by banks.  RealtyTrac says the top three banks with foreclosure zombies are Bank of America, Wells Fargo and JP Morgan Chase.

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Franklin County’s Foreclosure Rate Lowest in Years

Franklin County’s foreclosure rate has dropped to 10%, while Florida’s overall rate is still high at 26%.  The national rate is now only 10%, too.

While the widespread housing market recovery continues, foreclosures have fallen to pre-housing bubble levels, according to RealtyTrac’s latest Housing Market Recovery Index released this week.   The foreclosure activity is 65% below its peak rate nationally.  But the recovery is happening at different speeds in various markets.

Southwest Florida is one area leading the recovery with rising prices fueled by cash purchases and investor buyers.  And Franklin County’s rate is comparable to the national average.  But other parts of Florida still have foreclosure activity much higher than the national rate.

Foreclosures Filings in Franklin County

This year through July, there were 102 new foreclosure cases filed here in Franklin County, according to Clerk of Court Marcia Johnson.  In 2012, a total of 180 cases were filed.  This is down from the peak here in Franklin County when annual filings were over 200.  Johnson also reported that only 21 cases were filed during 2005, her first year in office.  While the level of foreclosure filings remains somewhat high for the county, there are few new filings on St. George Island.  Currently, there are no active bank owned listings on St. George Island.  This is due, in part, to the active market on St. George and to the bank’s willingness to approve short sale transactions.

Buying an REO Property

While the number of bank owned properties on St. George Island is greatly reduced, there are still a few on the market (currently five active REOs).  If you’re planning to submit an offer, remember these tips.

  1. Banks price the properties according to appraisals and current valuations, so don’t expect a significant discount off list price, especially during the first thirty days on the market.
  2. Banks are aware of repair issues, negative features and the condition of the properties.
  3. Banks like clean contracts with few, if any, contingencies.  Cash sales are preferred.
  4. Be sure to submit your proof of funds with a cash offer, or your pre-approval letter with a financing contingency.
  5. On your contract, use the name(s) in which you wish to take title.  It’s difficult to make even a small name change after the paperwork is submitted.
  6. Inspection periods allowed by banks are typically 5 to 7 days.  Have your inspection team ready.
  7. Plan detailed inspections.  The property is sold in “as is” condition with no warranties.
  8. Be patient.  The seller is an institution, and is in control of this transaction.
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