An estimated 2 million homes are in foreclosure limbo because their foreclosure processes were started – but never completed – after the housing bubble burst. Lenders may delay finishing a foreclosure in order to avoid paying taxes and other costs, but homeowners often move out of the homes in order to avoid the eviction process. These foreclosures, often called “foreclosure zombies,” can come back to haunt homeowners years later when banks do foreclose on the homes and then pursue the homeowner for the deficit between the amount owed and the price paid at auction.

What You Said:

“Mike,” one of our favorite realtors from Sarasota, observed that he sees zombie foreclosures pretty much every day in his area. “Walking away does not remove [your] liability,” he warned, describing zombie foreclosures as a “noose around [homeowners’s] necks.” “Ron” said that he is responding to the problem by becoming a “zombie killer” and tracking down owners, getting quit claim deeds, mitigating the liens, and then rehabbing the properties for profit. He optimistically added that “entrepreneurs and the market can fix economic problems…if the government will get out of the way!”

Several other BEIL readers got into a serious argument over whether or not it banks were doing the right or fair thing by creating “zombies” and just who should be responsible for the properties while they remain “undead.” “WT” believes that “the minute the banks decide they will take the home back…at that point it is the bank’s problem.” However, “Seriously” disagreed, saying that although banks are doing “some shady things” and “should be reigned in,” homeowners have to “accept the responsibility that homeownership entails” and that “this childish mentality of walking away from responsibility has got to stop.” “Lynn” disagreed, saying that the reality is that banks” need to take the responsibility for any taxes, maintenance, etcetera” because they are “stealing the homes, just not making it legal.” She cited lenders’ “phony, pretend lending” as cause for homeowners to walk away from their homes.

Another argument arose over whether or not giving your home back to the bank is an acceptable fulfillment of the loan contract. “John R” reported that a friend of his had lost a property in Ohio nearly two years ago and was recently arrested and temporarily jailed for failing to maintain the home after the foreclosure. “Seriously” fired back about this, saying that the homeowner agreed to “pay back the money [borrowed]” and that “allowing a foreclosure is not honoring the contract.” While some readers did appear to have some sympathy for Seriously and the banks, both “Dennis” and “Common Sense” emphasized that misleading and illegal practices on the parts of lenders led to many of today’s housing issues. “Underwater” agreed, saying that “the contract argument falls apart when you consider the damage done [by lenders] these past few years.”

This is just part of the dialogue that went on between our readers about these foreclosure zombies. “Terri” brought up an extremely valid point about how to determine whether or not you are actually going to be foreclosed on or whether a bank is going to let your home become a zombie that you will just have read here to get the full story. Read all the coverage and commentary, including one reader’s “Common Sense” award to another, here, then leave your own thoughts and opinions in the space below.

RE: “NAHB Cites ‘Myriad Issues’ Leading to Flawed Appraisals in Construction Market

Summary:

Many builders are complaining that available financing for developments is too tight and makes it too hard for them to get back in business. The National Association of Home Builders (NAHB) reported that “our builder members…can’t get access to construction loans to develop lots in markets where demand is on the upswing” due, in large part, to “inaccurate appraisals” that lead to cancelled home sales and rising building material prices. NAHB says that there are too many unregulated discrepancies in the appraisal system and that the result is “inconsistent, confusing, and does not serve consumers well.”

What You Said:

It probably will not surprise you that our readers who are also appraisers took issue with this charge. “Harvey” pointed out that although states can add to appraisal guidelines, all loans that are handled by federally-funded entities must also meet federal guidelines. “Barry” added that when “price does not equal cost,” NAHB members have a tendency to blame a bad appraisal rather than reality (you should really read his funny dramatization of this scenario here).

Most readers did agree that there are appraisal problems out there, with “Common Sense” leading the charge, asking, as he is prone to do, “does the phrase mathematical certainty ring a bell?” Common Sense’s company builds waterfront custom homes and he reports that he is seeing these problems on the front lines every day. He also warned that there is “no end in sight.” “Anthony” agreed, warning that “appraisers, just like the rest of the real estate industry, [do] not know anything about ‘values.’ All they know about is prices,” he added, calling “the comps system…a fiasco.”

 

by Carol VanSickle