One of the defining characteristics of a zombie title (or zombie foreclosure) is that the owner of the foreclosed home does not realize that they still own the property. Basically, the borrower whose property was foreclosed on assumes that the bank now owns their property, but the bank never actually completed the foreclosure because it wasn’t worth it to do so. Thus, taxes and other costs associated with the property are still the responsibility of the borrower to pay, but the borrower thinks that they don’t owe anything because they assume the foreclosure was completed. The property, meanwhile, sits neglected and deteriorating, since no one knows they’re responsible for it.
Zombie foreclosures often happen in areas where property values are so low that the sale of the property will not compensate the lender for the expense of completing foreclosure proceedings. The first step in a zombie foreclosure is that the initiation of the foreclosure process causes the borrower to vacate their property, as would be expected. However, borrower who have been forced to vacate their property don’t often assume that the property is still theirs, as the bank didn’t think the title was worth claiming. Thus, the borrower is likely unaware that they own the property, and the bank doesn’t care who owns the property. See our article on this topic for further information.
