This is how I buy zombie foreclosure properties.
Please contact a real estate attorney before purchasing a zombie foreclosure. This is a complex strategy that requires the right expertise.
What is a zombie foreclosure?
I would define it as a property that has been abandoned by both the owner of record and the lien holders. How would you know if the property has been abandoned by the lien holders and the owner? The easiest way to check abandonment is to verify if the property is vacant and if the taxes are current or delinquent. If the property is vacant and the taxes show a delinquency of greater than 2 years then I would assume the lien holder, as well as the owner, have abandoned the property. Zombie foreclosures came into existence because at the bottom of the downturn banks/lien holders faced a problem that they had never encountered before. They were faced with massive foreclosures on properties that were worth less than the cost of the foreclosure process. One way to solve their burden was to write off the properties and leave them in the owner's name. This created a glut of properties that could not be bought or sold due to liens still being attached to the properties, thus creating a zombie foreclosure.
So how does an investor go about purchasing a zombie foreclosure?
Prior to purchasing a zombie property/foreclosure, you will need to perform a title search to understand what liens are attached to the property and owner. Some liens can be easily removed, where as state and federal liens are not easily removed. You will need to contact the owner of record. Once you have made contact, you will purchase the property or have them deed it to you through a quit claim deed subject to the liens. The owner needs to understand that they are still liable for the liens or delinquent mortgages attached to the property even if they have not paid the bank in years. The only time they are not personally liable for the liens is if they filed for a bankruptcy in the past and listed the lien holder as a creditor.
Once you take title to the property, you will need to file a quiet title action against any lien holders on record. This works best if the lien holders are a large bank. A quiet title action is a legal action against anyone or entity that has an interest in the zombie property. A quiet title action by definition requires the named parties to come forward to state their interest in the property. If the named parties do not come forward within the allotted time of the legal action, usually 28 days after being served, then they will lose their right to claim an interest in the property. They will also have their rights extinguished and a judge will sign an order to have the liens released.
This is a high-level strategy that requires a lot of knowledge and some cash as you will not be able to purchase these properties using financing. The beauty of this strategy is that it does not require a lot of cash. Most of the owners in my area (Dayton, OH) have sold their zombie properties for between $250 to $3000 plus the delinquent taxes. The cost of a quiet title action is between $1200-$1500 depending on which attorney you use. Most quiet title actions are won by default judgement due to the lien holders failure to respond or disclaiming their interest after being served the notice. As stated above please contact a real estate attorney before pursuing this strategy. When used correctly a zombie property can be purchased for pennies on the dollar and then the hidden equity can be released via a quiet title action. Good luck and let me know what your thoughts are in the comments section.
Any advice from the 'owner' perspective?
I'm the condo owner who filed bankruptcy listing the lender and the property. The last time I spoke with the lender, they advised they have closed the account and will only accept a settlement offer. I still live in the home and have repaid any past due property taxes and HOA assessments. If I decide to go through a company buying properties, am I allowed to sell the home for any financial amount or is processing a quit claim deed through a seller my only option? Thanks.
Originally posted by @Keith Howard:
Any advice from the 'owner' perspective?
I'm the condo owner who filed bankruptcy listing the lender and the property. The last time I spoke with the lender, they advised they have closed the account and will only accept a settlement offer. I still live in the home and have repaid any past due property taxes and HOA assessments. If I decide to go through a company buying properties, am I allowed to sell the home for any financial amount or is processing a quit claim deed through a seller my only option? Thanks.
Is the mortgage still attached to the property?
Hello Paul, thanks for responding. I have to assume, yes. I'm not sure how I would verify that other than going through then lender. I looked at the Country Assessor to see what's listed on the deed, it only shows my name, but I'm pretty sure that's now how that works.
Originally posted by @Keith Howard:
Hello Paul, thanks for responding. I have to assume, yes. I'm not sure how I would verify that other than going through then lender. I looked at the Country Assessor to see what's listed on the deed, it only shows my name, but I'm pretty sure that's now how that works.
Contact a title company and order a title search on the property. It should cost you less $300. The title search will list all the liens and judgements against you and the property if there is any. Once you get a title search done then you can formulate a plan.
Thank you for that direction.
Hi 👋 so I'm new to this entire situation. Here's my troubles...my fiance and I both dealt with divorces and sold out of our houses. He sold his to the bank where mine was easily transfered to my ex's families llc. So now...3years later...the property he "sold" is vacant still squatters use it sometimes. We get so many calls about selling the property to "inventors" which made us look into the situation and the bank has done nothing with the home. It's still listed as owned by my fiance.
We have outgrown our really nice highrise downtown apt. Especially now we have kids. The home was my fiance's for +19. While it's not idealic for us to be there, it's needed, if we can be. What should I do to make sure we can move back in?
Thanks for the information, it was very helpful! I'm a investor just north of Dayton and I'm working on purchasing a zombie foreclosure right now. What title company did you use? Thanks!
Sorry for the late reply. I'm not on Biggerpockets as much as I was in the past.
So your fiance still owns the property. I would get a title search to see what liens are still attached to the property. You can also search the county auditor and treasurer's site to see if the taxes are being paid or if they are delinquent. Another search that can be performed easily is searching the county clerk of courts website to see if there are any pending foreclosures against your fiance. Once you have this information you can formulate a plan.
Assuming the bank abandoned the property and stopped paying the taxes you can proceed with filing a quiet title action to get the lien released if they haven't already released it. At any point in the process, you can file an eviction to remove the squatters. The property is yours to secure and use if necessary. Please use an attorney if you plan to file a quiet title action or eviction. Good luck to you.
Paul Amegatcher
Hey Paul,
It’s been awhile since there was any activity on this post. With recent changes in the market, I know there a lot of smart investors in the Dayton area who pursue this strategy and have swept in to pick many of these properties up. Do you have any information on the current trends of the area? Are zombie properties still possible to find in recent months? Thanks!
This is an area that I specialize in. I picked up 3 since September and have more in the pipeline. If you would like to talk about how I do it I’d be happy to share
Originally posted by @Emily Menker:Hey Paul,
It’s been awhile since there was any activity on this post. With recent changes in the market, I know there a lot of smart investors in the Dayton area who pursue this strategy and have swept in to pick many of these properties up. Do you have any information on the current trends of the area? Are zombie properties still possible to find in recent months? Thanks!
Thanks for contacting me. I'm not on BP much these days but I would be happy to connect. Send me a message when you get some time.
Quote from @Ozzy Smith:
This is an area that I specialize in. I picked up 3 since September and have more in the pipeline. If you would like to talk about how I do it I’d be happy to share
I'm sure the #'s are low, but this is a very interesting topic. I would love to hear more about your perspective.
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Appraiser North Carolina (#A8096)
- Green Haven Realty
Zombie house, meet Zombie thread....
@Tony Green
My contact information is on my profile. Drop me a line directly and we can schedule a time to talk and I’ll answer some questions for you
Ozzy
Hi Ozzy, I am interested in talking about how to find and acquire Zombie properties. Thank you.
Lori Agajanian
#2 Foreclosures Contributor
- Paradise, CA
Quote from @Lori Agajanian:
Hi Ozzy, I am interested in talking about how to find and acquire Zombie properties. Thank you.
Lori Agajanian
his advice was severely flawed. I wouldn't put much into to a six year old post.
@Paul Amegatcher I know this post is much older, but it has the greatest amount of detail that's similar to a property I have questions on. Thankss for sharing!!
My question is, is the process the same when the owner of record is the foreclosing bank? Scenario here is the bank foreclosed on property, no bidders at auction, so bank purchased. Non-judicial deed placed in bank's name, same bank then files a release of mortgage.a few months later.
The bank stopped paying taxes, so property is coming up for auction. Also, Property has been vacant for some years.
I contacted the bank about purchasing since the property is deeded to them. However, they no longer have the property in their system due to release of mortgage.
Any options when the bank owns the property?