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Vampires and Monsters and Zombies, Oh My
Vampire REOs and Zombie Foreclosuresrnstar in a brief report issues by RealtyTrac this morning. These “Monsters of the Housing Market,” therncompany says, at least partially explains why so many bank-owned homes are notrnavailable for sale and why so many other properties are standing vacant.</p
Vampire REO is the company’s term forrnhomes that, while foreclosed and technically owned by the bank, are stillrnoccupied by their former owners. RealtyTracrnsaid it found that 47 percent of bank-owned homes nationwide are still occupiedrnby the former owner. </p
“On the surface,” it says, “thesernproperties will often look like normal, non-distressed homes, but beneath thernsurface they represent a shadow inventory that is becoming more imminent asrnrising home prices motivate banks to sell off these homes to try to recouprntheir losses on soured loans.”</p
The data makes no assumption about the reason</bfor this. Are the banks so overloadedrnthey have been unable to process evictions? rnAre there legal issues delaying or preventing evictions? Is it possible that the banks and thernprevious owners have reached formal temporary or permanent leasernagreements? If the latter is widespread,rnmight it indicate quite the opposite of a shadow inventory and a mutuallyrnbeneficial accommodation for the bank and the displaced homeowner?</p
Vampire REOs are more prevalent in somernstates and metros than other. Therngraphic below indicates vampire rates in some areas that are higher than thernnational average of 27 percent. Forrnexample, in Miami 64 percent of REOs are classified as “Vampire”; in Phoenix itrnis 46 percent and in Las Vegas 40 percent. Though many of these metros were especiallyrnhammered by foreclosures, some did not suffer disproportionately so the unevenrndistribution might also indicate some prevailing local factors. </p
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A Zombie Foreclosure, on the other hand,rnis a home that has been vacated by the owner before a foreclosure has beenrncompleted. A recent update by RealtyTrac shows that aboutrn20 percent of homes in the process of foreclosure are vacant. </p
Of the 20 metropolitan areasrnin the graph below, eight are in Florida, a state with notoriously longrnforeclosure timelines and large foreclosure backlogs. New York is generally noted as the state wherernit takes the longest time to foreclose. rnThese Zombie Foreclosures might indicate that many homeowners expectedrntheir situations to be resolved long ago and have moved on with their lives. </p
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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