RealtyTrac has identified two monsters threatening the housing recovery: Vampire REOs and Zombie Foreclosures.
Vampire REOs like the one pictured to the right in Miami, Fla., are bank-owned homes that are still occupied by the previous homeowner who was foreclosed on. On the surface these properties often will look like normal, non-distressed homes, but beneath the surface they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these homes to try to recoup their losses on soured loans.
Zombie foreclosures like the one pictured to the right in Las Vegas, Nev., are homes that are still languishing in the foreclosure process but have been vacated by the homeowner being foreclosed. Often these homes are more obviously distressed, falling into disrepair with no one to perform regular maintenance and upkeep. As such, they often represent a threat to the quality of the surrounding neighborhood, dragging down home values. In addition, the homeowner who left the property may not be aware that he or she is still responsible for property taxes and any other expenses that come with home ownership — leaving them in an even tougher financial spot when they discover this reality.
Great Challenges Represent Great Opportunities
These threats to the housing market can be bargain opportunities for pro-active buyers and investors. Zombie foreclosures represent a prime opportunity for a short sale that helps the homeowner, the neighborhood and even the hesitant-to-foreclose bank in the process; while vampire bank-owned homes represent imminent inventory that you can act on before other buyers and investors are aware of it.
Local Broker Perspective
“The New York metro is experiencing a spike in mortgage defaults, however, there are very few vacant foreclosures or bank-owned properties that are languishing on the market,” said Emmett Laffey, CEO of Laffey Fine Homes International, covering Long Island and the five boroughs of New York. “Typically these types of properties are sold well within 30 days of hitting the market.”
Video: How to Find "Monster" Bargain Opportunities on RealtyTrac