Zombie Foreclosure

A zombie foreclosure occurs when homeowners who have received a foreclosure notice vacate their house before the foreclosure is completed. Because the lender never finished taking title, the property remains legally owned by the original homeowner but sits vacant and unattended. This can lead to property deterioration, unpaid taxes and fees, and neighborhood decline.

Key takeaways

• A zombie foreclosure happens when an owner abandons a property after a foreclosure notice but before title transfers to the lender.
• Until the foreclosure is legally completed, the homeowner still holds title and remains responsible for taxes, insurance, HOA fees, and maintenance.
• Vacant, neglected houses can lower nearby property values and create safety and sanitation problems.
• Zombie foreclosures were common after the 2008 housing crisis and appeared again in higher numbers during 2020.

How zombie foreclosures happen

1. Homeowner defaults on mortgage and receives a notice of default or other foreclosure paperwork.
2. The homeowner assumes they must leave immediately and abandons the house.
3. The lender starts—but does not complete—the foreclosure. Reasons for stopping include the cost of repairs, unpaid taxes, or other expenses the lender would inherit.
4. Title remains in the homeowner’s name (often without their knowledge), creating a “zombie title.” The property remains vacant and deteriorates while the legal ownership still belongs to the original owner.

Until a court or foreclosure sale formally transfers title to the lender, the homeowner retains legal obligations for the property.

Impact on homeowners and neighborhoods

• Financial liability: Homeowners remain responsible for property taxes, mortgage arrears, homeowners association fees, insurance, and utility charges even if the home is vacant.
• Legal exposure: Local governments or HOAs may place liens or fines for unpaid taxes, code violations, or maintenance costs.
• Neighborhood effects: Vacant, unmaintained homes can attract vandalism, pests, and crime and can depress nearby property values.
• Credit consequences: Walking away from a mortgage and allowing foreclosure proceedings to proceed will damage the homeowner’s credit.

What homeowners should do

• Stay in the home until you receive an official written notice to vacate or until title has been legally transferred.
• Confirm the foreclosure’s status with the lender and request written confirmation if the lender decides not to complete the foreclosure.
• Continue paying property taxes, HOA fees, and insurance if possible, or contact tax authorities and the HOA to discuss options.
• Keep records of communications with the lender and any notices received.
• Explore options with the lender: loan modification, repayment plan, short sale, deed in lieu of foreclosure, or bankruptcy—each can affect timing and liability differently.
• Seek legal advice or contact a housing counselor if you suspect a zombie foreclosure or are unsure of your rights.

FAQs

Will a zombie foreclosure affect my credit?
Yes. Defaulting on and abandoning a mortgage leads to foreclosure proceedings and will typically harm credit scores.

Who is responsible for the property during a zombie foreclosure?
The homeowner remains the legal owner until title is transferred by a court or foreclosure sale. That means the homeowner is responsible for taxes, insurance, upkeep, and any citations or fines.

Where are zombie foreclosures most common?
They can occur anywhere but tend to concentrate in lower-income communities. Some regions experienced higher rates following financial downturns.

Why are they called “zombie” foreclosures?
The term refers to properties that are left “dead” or vacant after owners leave but that haven’t been legally reclaimed by lenders—so the home is in a limbo state like a “zombie.”

Sources

• ATTOM Data Solutions (vacant/zombie property reports)
• Urban Institute (state and local finance research)