The overall number of foreclosure filings may be dropping, and the housing market may be rebounding, but the mess left by the crash of the real estate market is still being cleaned up. Thousands of homes in which the homeowners were unable to stop foreclosure are sitting empty. These so-called “Zombie Foreclosures” have increased an astounding 58 percent in New Jersey in the last year.
Since these homes are empty, they fall into disrepair on both the inside and the outside of the home. These homes have the effect of reducing the value of the properties around them. Further, they are a constant reminder of the chaos and devastation done to the housing market during the Great Recession. Not only have the owners of these homes and the neighborhoods been affected by zombie foreclosures, but the loss in property taxes has affected counties in New Jersey and across the country as well.
Only now are lenders beginning to turn their attention back to these properties that have sat in limbo for years in some cases. Some states are doing what they can to speed up the resolution of zombie foreclosures. In other cases, land banks are being used by governments to purchase these properties. Homes that can be saved would be repaired, and others would be demolished.
Families who are unable to stop foreclosure proceedings by their lenders and have already vacated their homes may consider filing for bankruptcy in order to be able to move on financially. Even after the foreclosure is complete and the home is sold at auction, any monies not recouped by the lender will affect the borrower. If the balance is forgiven, it may still be counted as income for tax purposes, or the lender may file a separate suit to recover the balance from the borrower. Filing for bankruptcy could relieve the homeowner of any further financial responsibility for the home.
Source: MarketWatch, “Zombie foreclosures claw higher in 10 states“, , June 26, 2014
