Recent data from RealtyTrac shows that 47% of bank-owned homes (REOs) nationwide are still occupied by the former owner.
These so-called ‘vampire REOs’ are part of the reason why so many bank-owned homes are not available for sale.
So, why are so many people still living in bank-owned homes? In some cases, the banks are so backlogged with foreclosures they have been unable to process evictions in a timely manner. Depending on which state they are located in, they may also be facing legal challenges that are delaying the process. In other cases, the previous owners have signed temporary or permanent lease agreements with lenders.
‘On the surface, these properties will often 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,’ writes Daren Blomquist, vice president of RealtyTrac, in a report.
Vampire REOs are more prevalent in some areas than others. Metros with high percentages of vampire REOs include Houston (65%), Miami (64%) and Los Angeles (61%). Metros with lower percentages include Atlanta (36%) and Detroit (36%).
Also representing a large percentage of the so-called ‘shadow inventory’ are ‘zombie foreclosures’ – homes that have been vacated by the owner prior to completion of the foreclosure process.
Currently, about 20% of homes in the process of foreclosure are vacant, according to RealtyTrac. Many of these homeowners, knowing that foreclosure is imminent, have simply moved on before the process is completed.
In general, zombie foreclosures are more prevalent in the ‘judicial’ states, such as Florida and New York, compared to the ‘non-judicial’ states.
‘Often, these homes are more obviously distressed, falling into disrepair with no one to perform regular maintenance and upkeep,’ Blomquist writes. ‘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 homeownership – leaving them in an even tougher financial spot when they discover this reality,’ he adds.
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