Southern New Hampshire Real Estate and Short Sales: What The Heck Is A Zombie Foreclosure???

What The Heck Is A Zombie Foreclosure???

No, it's not the latest remake of "Night of The Living Dead" and it certainly hasn't been nominated for an Academy Award.  It is yet another strange twist in our national foreclosure crisis. AZombie Zombie Foreclosure (otherwise known as a Zombie Title or a Bank Walkaway) occurs when the bank never completes the foreclosure. More and more distressed homeowners in Southern New Hampshire, and across the country, have been the recipient of a nasty surprise when they discover that the home they thought they had "walked away" from is still stalking them. 

Since the housing bubble burst and the foreclosure crisis began, thousands of financially distressed homeowners have become so disgusted with the morass of confusion that is the hallmark of the various modification programs that have been trotted out or with the frustration of an improperly handled short sale attempt that they have eventually just given up and "walked away" from their mortgage and their home in an effort to escape the unrelenting stress and start anew.  Some have even gone as far as filing bankruptcy in an effort to protect themselves from liability.  And, while filing bankruptcy can protect from any liability with regard to paying back the loan that the mortgage was based on, it does not protect against any costs incurred by the property itself going forward.

Let me explain.  When a borrower/homeowner walks away and/or files bankruptcy, the assumption is that once the lender is no longer receiving payments as due, they will foreclose...and they usually do.  In fact, Southern New Hampshire has one of the shortest foreclosure timelines in the Country.  But sometimes months, or even years, after the homeowner has walked away they discover that the bank never did foreclose. 

This is important because the act of foreclosure is what transfers ownership and, therefore, legal responsibility for the home from the original distressed homeowner to the bank.  If the bank doesn't foreclose the unsuspecting homeowner is still responsible for the property...for property taxes, water/sewer fees and condo fees that continue to accrue and, sometimes, lawsuits from the town or the county because of the deteriorating condition of the property...and on and on. A January 10th Reuters Report entitled, "The Latest Foreclosure Horror, The Zombie Title" tells the true life horror stories of homeowners who have had their finances and credit further destroyed by mounting bills levied against them by the Town, County or State for their abandoned property.  Some have even been threatened with jail if they failed to bring their property into compliance.

This responsibility is still there even if the homeowner has filed bankruptcy because bankruptcy protects from the point of the filing backward but not forward.

Over the last month, the news reports have been filled with stories of Zombie Foreclosures as this new twist comes to the forefront but I have been personally aware of a number of instances right here in Southern New Hampshire and Northern Massachusetts for well over a year and have, in fact, successfully facilitated short sales for several distressed homeowners caught in that nightmare.

If you have "walked away" from your mortgage and your home in the past, my best advice to you is check to make sure the foreclosure actually took place and, if it hasn't yet, seriously consider a short sale.  They can be done successfully which will result in the outcome you were trying for in the first place, you'll get to finally "walk away" clean.

For more information on Southern New Hampshire Short Sales, you can contact me at 603-490-5344.

And remember, "beat 'em or burn 'em, they go up pretty easy".



Comment balloon 47 commentsJoy Baker • February 24 2013 06:53PM


The homeowners undertook a stragetic foreclosure a few years ago maybe in for more surprises than just a zombie home.  I know of one homeowner where the bank is now suing them for the amount of their original mortgage.  I suspect they aren't the only one on the hotseat.

Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) over 7 years ago
Oh no I think we need to be aware and somehow counsel our clients.
Posted by Kathy Judy (Tri-Cities Real Estate retired) over 7 years ago

And for those who bought another home and then just walked away.... perhaps examples should be made of them. 

Posted by Jerrill Ewing, Builder (N & J Lake Properties, LLC) over 7 years ago

no such thing as tooo much information when it comes to the land mines of the foreclosure crisis.

Posted by Sally K. & David L. Hanson, WI Real Estate Agents - Luxury - Divorce (EXP Realty 414-525-0563) over 7 years ago

Cindy, Kathy, Jerill and Sally & David...thank you for reading and commenting.  Zombie foreclosures, unfortunately,  are not a specific punishment for those who have participated in a strategic default or a buy and bail scheme.  Many good folks who truly could not make payments because of an unexpected life event and who were then so beaten down by their unsucessful attempts to modify their loan into something more affordable finally gave up and walked away (or so they thought).  Many were foreclosed on and, depending upon the State they live in, may find out down the road that their lender has the legal right to come after them for the deficiency (a whole other issue that has yet to come to the surface) and some were never foreclosed on and are now finding out they are still legally responsible for the home. 

It is becoming more and more apparent that there is no running and hiding from this mess.  For the most part, the only chance a financially distressed homeowner has of being sure of the ultimate outcome is to cooperate in a short sale.

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

I am hearing more and more stories about garnished wages and unforgiven mortgage debt from a foreclosure attaching to another property owned by the party.  Virginia is not the place you want to just up and walk away from a home and think you are going to get off with no consequences.

Posted by Chris Ann Cleland, Associate Broker, Bristow, VA (Long and Foster REALTORSĀ®, Gainesville, VA) over 7 years ago

I saw some attorney on Fox & Friends over the weekend saying something about a quit claim deed back to the bank to get your name off the title. Have you heard of that?

Posted by Gary L. Waters Broker Associate, Bucci Realty, Fifteen Years Experience in Brevard County (Bucci Realty, Inc.) over 7 years ago

Wow!   I had never followed any of the foreclosures that closely, so I never thought about it!


Posted by Dagny Eason, Fairfield County CT, CDPE Homes For Sale and Condo (Dagny's Real Estate) over 7 years ago

I have to admit to having never heard of that before or at least thinking of it in that manner. I take it there is an mechanism where an individual can verify that a foreclosure has been completed. It would seem that a competent bankruptcy lawyer would confirm that during the fact finding phase.

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Posted by Marshall Brown, BSEE, CHI (Mid America Inspection Services, LLC) over 7 years ago

Joy, I hadn't heard of this - I think I need to do some checking.  What a shock to homeowners. 

Posted by Juli Vosmik, Scottsdale/Cave Creek, AZ real estate 480-710-0739 (Dominion Fine Properties) over 7 years ago

Yes, the Zombie title can be a pain in the you know what.  It is not only a responsibility issue, but also poses practical issues for short sales.  On one hand, we want the sellers to move out so that the new buyer can move in, but moving out before the close of escrow can become problematic when escrow falls through at the last minute. 

To Gary, I don't think a seller can just quit claim deed the property back to the bank to escape responsibility.  That's like an involuntary deed in lieu of foreclosure.  You can't impose property ownership on someone who does not want it.  Nice try, though.

Posted by Ute Ferdig, Because Getting It Right Matters! (Ferdig Real Estate Solutions) over 7 years ago

I had no problem with people that chose to attempt a strategic foreclosure (assuming that they educated themselves on them and knew the risks).  The zombie foreclosure is nothing more than the lender doing the same thing.  They are choosing NOT to foreclose.

What I find amazing is the comments condemning the individual for the action, but none comdemning the lender for the same thing.  Double standard?

Posted by Roger Johnson, Realtor - Hickory NC Real Estate (Hickory Real Estate Group) over 7 years ago

These are pretty common in California. Some banks start the foreclosure process but they never finish it. Those NODs are dangling out there for years, and sellers think the bank has seized the home when it hasn't. Sometimes the bank will tell the seller to hire an agent and do the short sale. For some reason, the banks don't want all of these homes through foreclosure and prefer to do a short sale.

@ Gary #7, you're talking about deed-in-lieu-of foreclosure, and those are almost always in the bank's favor, not necessarily the homeowner's.

Posted by Elizabeth Weintraub Sacramento Realtor Top 1%, Put 40 years of experience to work for you (RE/MAX Gold) over 7 years ago

Unfortunately, these types of properties are bad business for the banks, extremely unprofitable so they don't foreclose but there are many savvy investors who will buy them up at tax or lien sales so the homeowner who walked away can still walk away under those circumstances. Homeowners who seek professional help under these circumstances will find a suitable solution.

Posted by Kimo Jarrett, Pro Lifestyle Solutions (WikiWiki Realty) over 7 years ago

Here in Florida we still have thousands of these "zombie foreclosures" sitting around.  It takes about 700 days to finalize a foreclosure around here.  A looooong time.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) over 7 years ago

WOW!!! Excellent info, and thanks for letting us know about this issue!

Posted by Travis "the SOLD man" Parker; Associate Broker, email: / cell: 334-494-7846 (iXL Real Estate-Wiregrasss\) over 7 years ago

Hi Everyone~Thanks for stopping by and commenting.

@Chris #6, although this is completely different than Zombie Titles, I believe we will continue to hear more about Deficiency Judgments as time goes by.  Some States prohibit a lender from going after the foreclosed upon borrower for the deficiency if the mortgage was a first mortgage on a primary residence but other States allow it.  New Hampshire and Massachusetts which are the two States I deal with both allow Deficiency Judgments and I believe this will be the next big nasty surprise for the homeowners that walked away and DID get foreclosed on.  Yet another reason to cooperate with a short sale.

@Gary #7, I believe Ute #11 is correct.  You can't force the lender to accept a deed in lieu (which is what the Fox Attorney was referencing), they have to agree to it.

@Marshall #9, it depends on when the bankruptcy is filed.  Some borrowers file before the actual foreclosure, the assumption as I mentioned in the post, being that it is going to happen soon.  Most times it does, sometimes it doesn't and then you have a Zombie Title.

@Ute #11, I believe you are correct with regard to the deed in lieu.  You can't force the bank to accept it.  With regard to my short sales, I haven't found this to impact them at all because I obtain short sale approval and then we close.

@Roger #12, interesting point.  I actually don't condemn the banks for making a business decision.  My purpose in highlighting this issue was to illustrate the point that, more and more frequently, the homeowner that thinks they are "walking away" finds out they didn't really accomplish anything and the problem is still there.

@Elizabeth #13, I agree.   At this point, I've done a number of short sales on properties like this.  Usually, if the property has been hanging out there for awhile and the lender has not completed the foreclosure, they would rather do a short sale than foreclose.

@Kimo #14, that's interesting.  I haven't seen that happening here at all. 


Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

Well come on, the lender won't forclose on the home if a BK has been filed.  Afterward once discharged, sure but what if the back taxes, CITY fees, HOA dues etc are more than a realistic $$$ return, the lender may choose not to move forward and let the delinguent owner face the wrath of the zombie. We can't become stupid or not open our mail!  It's hard to fix stupid, I've come across quite a few the last few years and have found deaf ears are my worst enemy.

Posted by Michael Blue, REALTOR - 760-889-8877, Encinitas/Carlsbad (Home Smart Realty West) over 7 years ago

this is a latent nightmare....I am in the process of undoing several foreclosures and there are many, many more....title is going to be a REAL issue on previously foreclosed homes

Posted by Paddy Deighan JD PhD, Paddy Deighan J.D. Ph.D ( over 7 years ago

Here in Florida, we need Listings, so we are up for begging for even short sales and believe this! Response is often that they would rather, "HANG OUT" and wait for the bank to foreclose while living rent free, rather than short sale and recover from the serious dent of recovery on their credit.

We can talk till we are blue....and all they see is Free Rent.

Somewhere down the line, this has to bite them back.  Joy

Posted by Joy Carter & Jeff Booker Brother and Sister Team, Trust Your Family's Move To Our Expertise! (Keller Williams Parkland/Coral Springs Realty-GreatFloridaHomes Team) over 7 years ago

In a quit claim, you transfer your rights but not your responsibilities.

Posted by Pete Kelzenberg over 7 years ago

@Rob #15, Wow, 700 days to finaliize a foreclosure???  Our timeline here in New Hampshire is much shorter.  We are a non-judicial State and legally the lender can foreclose within 61 days of the first missed payment.  Of course, it never really gets done that quickly but I have seen foreclosures within 90 days.

That would be the risk of "hanging out" and trying to live rent free until the bank forecloses up here, @Joy #20, you'd be playing a game of Russian Roulette.  The bank might take 6 months, 9 months, a year but they might also foreclose in 90 days.

@Paddy #19, what circumstances are causing you to be able to "undo" foreclosures? 

@Pete #21, the term Quitclaim may have different definitions in different areas of the country.  In New Hampshire, when a Quitclaim Deed is given, the Grantor is making no warranty that the title is free and clear.  In this area Quitclaims are primarily used in family transfers or divorces.  A bank would not accept a Quitclaim Deed from a defaulted borrower.


Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

In some cases, the bank has scheduled the trustees sale and told the people to get out - then postponed it indefinitely.

And in one case I read about the lady signed a deed-in-lieu and it was reported to the credit bureaus. But the bank didn't complete the transfer. When her attorney contacted them 2 years later they said it was because of a lien on the property - but it turned out that the lien hadn't been placed until several months AFTER they accepted her deed-in-lieu.

Banks are doing what banks feel like doing. The ONLY safe way out from under a house is a sale - be it a short sale or an equity sale.

Posted by Marte Cliff, Your real estate writer (Marte Cliff Copywriting) over 7 years ago

Homeowners should understand that doing a short sale is preferable over foreclosure for many reasons. A short sale at least offers some control over the process, even though most times the seller does not get any money or only a little.

Some owners think that walking away is their final opposition towards the lender for being hounded for their mortgage payments. They imagine it's a "get back" on their part when in fact leaving things up to the bank puts them in jeopardy.


Posted by Sylvia Jonathan, Broker Associate, SFR (Coldwell Banker Platinum Properties) over 7 years ago

@Marte #23, that's really interesting.  The law always was that a Deed did not have to recorded for the transfer to be valid.  It just had to be signed and delivered to the Grantee.  It appears we are moving toward a belief that documents must be on Record in order to be valid.  I wonder if the laws truly have changed or if (as is frequently the case) things are being done that flaunt existing laws with the hope that no one will notice and/or have the money to legally challenge.

@Sylvia #24, you're absolutely correct, many distressed homeowners are so disgusted they think they are "getting back" at the lender by "walking away" only to find out that the only party they hurt is themselves.

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

Joy, of course you obtain short sale approval, but closing is not certain just because you obtained short sale approval.  Escrows fall out for reasons not related to the short sale and sellers who move out in reliance on escrow closing may end up with a vacant house and there is no assurance that the bank will approve the next offer.  I just recently closed a short sale escrow in which timely closing was uncertain because of the buyer's loan and we did not know if escrow would close until the day our short sale approval letter expired (we knew the lender was not going to give us another extension).  The buyers expected the sellers to be out by 5 p.m. which did not happen.  The sellers did not want to leave the house until they knew that escrow really closed as they did not want to leave the house empty for an undetermined period of time because they knew they would still be responsible for the house.

Posted by Ute Ferdig, Because Getting It Right Matters! (Ferdig Real Estate Solutions) over 7 years ago

Just another wrinkle in an already crumpled real estate arena!  As Elizabeth said in her #13 comment, they have been going on awhile here in California.

Posted by Myrl Jeffcoat, Greater Sacramento Real Estate Agent (GreatWest Realty) over 7 years ago

Hi Joy, we think the banks are afraid to foreclose now, in fear of the Feds, or the courts coming after them.

Posted by Bob Miller, The Ocala Dream Team (Keller Williams Cornerstone Realty) over 7 years ago

JOY congratulations on your feature. This has been coming up a couple of times a week it is getting so common. I complete a lot of BPO's and just completed a huge portfolio of these types oh homes, mist are vacant or say abandoned while others are occupied with 2 years or more of no payments on the books. the banks are starting to address them, they have to but still are not sure how to. My new bank listings sell on average under 7 days, they need to stop these "occupied auctions" and put them through the process to get them sold and improve neighborhoods and the economy by doing so.

Posted by Scott Godzyk, One of the Manchester NH's area Leading Agents (Godzyk Real Estate Services) over 7 years ago

If you're in foreclosure I don't understand why you do try and do a short sale.  I had a listing that sat for 3 years before the bank finally took it back in foreclosure.  At one point a tree fell through the house!  If a kid had gotten hurt at the property the previous owner is still liable!  Just get rid of it!

Posted by Marc McMaster, Putting my clients before myself (RE/MAX Centre Realty) over 7 years ago

It will be many years before all of the dislocations cased by the bursting of the real estate bubble work their way through all of our lives. Many years from now, today’s children will be grandparents and will be telling their grandchildren of the travails of the early 21st Century.

Posted by John Juarez, ePRO, SRES, GRI, PMN (The Medford Real Estate Team) over 7 years ago

Joy, as you mentioned, it's a twist and new terminology for few for sure. I think this is the next 'trend' after short sales and hopefully, there will be a process in place for Zombie Foreclosures before it's too late.

Congrats on your first feature.

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 7 years ago

@Ute #26 I suspect the difference in our experience is partially due to the way we handle short sale transactions.  With the transactions I handle the buyer is required to have their home inspection within 10 days of my seller client accepting their offer (the short sale request package does not go in to the lender(s) until the buyer has signed off on home inspection) and they are required to go forward with their financing including appraisal and title.  I handle it this way because my research has shown that there are at least as many short sale failures caused by uncommitted or unqualified buyers as there are those that fail because of an inability to obtain approval.  This way they obtain commitment, I obtain short sale approval and we typically close approximately 2 weeks later. 

I'm not sure you can do it this way in California as it appears that short sales, in particular, and real estate transactions, in general, are handled completely differently there than they are here.

@Myrl #27 crumpled is right!

@Bob #28 that may well play into it.

@Scott #29 Thank you so much for the congratulations!  I absolutely agree with you, the occupied auctions are absolutely asinine.

@Marc #30 You're right!  If someone gets hurt at a vacant property that has not been foreclosed on the homeowner who "walked away" is the one who is liable.

@John #31, this mess will certainly go down in history!


Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

Praful, thank you for the congratulations!  It certainly is a twist.  I think the next debacle is going to be when the debt from all the homeowners who "walked away" and WERE foreclosed on gets sold to collection agencies and the surprised "walk aways" find themselves being dragged to Court and sued for the deficiency.

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

Sounds great but not always the case. Had a seller that filed bankruptcy 3 years ago. House was included and the bankruptcy was discharged. Bank never foreclosed. Still in sellers name. Presented a short sale offer 2 years ago. Ocwen was lender. To date there has benn no response. Chased Ocwen for a year. Buyer gave up and moved on. Seller still on title.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max By The Sea) over 7 years ago

Joy, what a good/bad true story.  The advice you gave is very helpful for those who find out they have the problem.

Posted by Pat & Steve Pribisko (Keller Williams Greater Cleveland West) over 7 years ago

Wow appreciate the info and education.  I am familiar with the result of foreclosure (auction properties, deficiency judgments, etc.), but never considered what happens when the lender doesn't foreclose and personal bankruptcy...very interesting.  Thanks.

Posted by Chris Marquez (Charleston HOME Properties ~ over 7 years ago

Joy -- interesting information.  We are trying to help divorced person who had property assigned to other party, and filed bankruptcy.  Other party not making payments -- so bank put it into foreclosure process - and could have sold it anytime since July of last year -- but it is still sitting in "foreclosure limbo" - and our party cannot move forward - since lenders don't want to work with folks with foreclosures, until at least two years after the foreclosure CLOSES. BTW -- the other party doesn't want to short sale, or transfer deed in any way.  REALLY UGLY!

Posted by Steven Cook (No Longer Processing Mortgages.) over 7 years ago

@Bill #35 Ocwen can be very difficult to deal with.

@Pat & Steve #36, thank you!

@Chris #37, I know...whodda thunk it!

@Steven #38, divorce agreements routinely mess people up when it comes to real estate.  IMHO, many divorce attorneys do not understand real estate law or mortgage banking and do not adequately explain to their client that just because the two divorcing parties have reached a private agreement with regard to the mortgage, it does not change the legalities of who is responsible.


Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

My apologies, Joy, in my condemnation statement, I wasn't inferring that you were doing that.  Rather, I was replying to the various comments before stating as such.

I don't understand why some people believe that the borrower has a moral obligation to pay until all their money is gone, yet these same people do not hold the lender to the same standards of moral obligation and contracts.

Posted by Roger Johnson, Realtor - Hickory NC Real Estate (Hickory Real Estate Group) over 7 years ago
No need to apologize, Roger. I was not the least bit offended and understood that your statement was actually directed at other comments. It's a crazy world we live in!
Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

I have been surprised by the number of people that are unaware that the foreclosure was never initiated or completed in some instances

Posted by Paddy Deighan JD PhD, Paddy Deighan J.D. Ph.D ( over 7 years ago

It's a variation of "out of sight, out of mind", Paddy.  People mistakenly believe that just because they are no longer there physically, that the problem no longer exists. 

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago

We were offering our customers to do a short sale of their vacation condo in Daytona. They first said "Yes" and we started working, and then they went to the atorney, he was a bankruptcy attorney, and no surprise, they ended up filing bankruptcy.

We called after that and suggested that we do the short sale. They, surprised, told us that they have given it to the bank. Yep, but has the back taken it?

We couldn't make them agree to anything, they were so confident, arrogant, you name it...

3 year later they call. Now there is a problem. The Lender never foreclosed, so all new debt is on them. they are facing what they were running from. Maintenance fees, taxes, assessments, and now all these late fees, and legal fees.

So, yes, you can give it to the lender, but if they have not foreclosed, they have not taken it, and you are responsible for it.

Excellent post. I read you BIO, very impressive. Sounds like a new star coming on our horizon.

Best of luck

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) over 7 years ago

Thank  you for your kind words, Jon.  I had something very similar happen to me except that he initially did want to short sell.  I put the property on the market, found a buyer who was willing to pay cash and take the property "as is"...both necessary given the condition of the unit and of the association, obtained short sale approval on both his first and second contribution required, deficiency waived and then he decided he would rather file bankruptcy and let the bank foreclose because he did not want to pony up $1200 which is what I negotiated a NH Division of Employment Security Lien down to.  Fast forward a year and a half, the bank still hasn't foreclosed and the condo fees, etc. are piling up and the Association is not happy with him.   Perhaps not a smart move on his part, after all.

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago
Joy, wow! Hadn't heard that term before, and it really is descriptive! It might have been better for the old owner to just stay pyt!
Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) over 7 years ago

Hey Patricia~ Crazy, isn't it?  The problem with trying to just stay in the house, here in New Hampshire, is that, in general, we have one of the shortest foreclosure timelines in the country AND we are a Deficiency State, so it really becomes a game of Russian Roulette.  If you really can't afford the mortgage anymore, a short sale is probably the best course to take.  Thanks for stopping by to comment!

Posted by Joy Baker, So NH RE & Short Sale Specialist (RE/MAX Insight) over 7 years ago