What Are Zombie Titles?

What Are Zombie Titles?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Zombie titles are essentially properties caught in between an owner who has abandoned the property and a lender who has not yet taken ownership through foreclosure.

In many cases owning a zombie title means the borrowers thought that the bank had already seized their property, so they moved out, leaving it empty and in a state of limbo.

It happens if the lenders do not properly complete the required legal steps to foreclose on time, thus making the delinquent borrowers unknowingly remain as the legal owners of the properties.

This series of upsetting events can result in a property being referred to as having a “zombie title.”

Consequences for Homeowners

Homeowners burdened with zombie titles suffer negative consequences.

First of all, they’re unaware that they still legally own and are responsible for the property.

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In some cases, homeowners only find out they are still accountable for the property when it accrues unpaid fines and taxes or is threatened with a demolition order.

Homeowners can also face damage to their finances as their credit scores continue to take hits for unpaid loans and interest piled up on an abandoned property.

Moreover, as legal owners of the property, they could be potentially held responsible for any damage, liability, or criminal activity that occurs on their premises.

How to Deter Zombie Titles

Finding a practical response might lead one to ask, how do you combat zombie titles? Here are a few tips:

  • Understand foreclosure laws and processes in your locality to effectively navigate the foreclosure process.
  • Actively monitor the progress of the foreclosure process, if applicable, to ensure that you are aware of the latest developments.
  • Seek professional advice from property rights attorneys, mortgage counselors, or title experts to help you make informed decisions.
  • At times, speak directly to your lender,¬†asking about¬†the status of the foreclosure process, the legal implications, and rights/responsibilities associated with it.

Zombie titles can turn into financial nightmares if not carefully dealt with. By understanding foreclosure processes and your legal responsibilities, as well as seeking professional counsel, you may avert potential risks that come with owning such titles.

Key Takeaways

  • Zombie Titles refer to properties caught between an owner who has abandoned the property and a lender who has not completed the foreclosure process.
  • These titles arise when lenders fail to follow the proper legal steps to take ownership of a defaulted property, resulting in the borrowers remaining as the legal owners in an uninformed state.
  • Consequences for homeowners include damage to credit scores, accumulation of fines, potential legal liabilities linked to the property, and deteriorating credit scores.
  • To avoid the risks of zombie titles, one should have a clear understanding of the foreclosure process, monitor its progress if involved, and seek professional advice from attorneys, mortgage counselors, or title experts.

Related Questions

1. What is the biggest concern associated with a zombie title?

The primary concern associated with zombie titles is that homeowners inadvertently stay as the legal property owners and are responsible for the liabilities, taxes, and any damage to the property even though they perceived their property was seized by the bank.

2. How do zombie titles impact neighborhoods?

Zombie titles create several neighborhood issues, such as plummeting property values, increased crime rates and squatters, and forcing local municipalities and neighbors to bear the costs of maintaining an unoccupied property.

3. Is it possible for homeowners to reclaim a house once they’ve discovered it maintains a zombie title?

Yes, in some cases, a former homeowner may be able to reclaim the property with a zombie title, but the process can be complex and time-consuming, depending on state laws and specific case details, so hiring a property attorney may be necessary.

4. Do zombie titles impact credit scores?

Yes, zombie titles can indeed harm credit scores. Unaware homeowners are legally liable for mortgage, taxes, and other fees, causing their credit ratings to deteriorate over time with each additional unpaid debt associated with the property.

5. How can banks help prevent zombie titles?

Banks can prevent zombie titles from materializing by meticulously following the foreclosure process, assisting borrowers throughout, and keeping the affected owners informed about every step to make sure the borrowers understand whether or not they are still responsible for the property.