Michelle Conlin, of Reuters, published an article on zombie title. Found here… Special Report: The Latest Foreclosure Horror: The Zombie Title
While Conlin only cites one instance it’s actually pretty common…
The bank files for foreclosure. On the sale date at the courthouse the bank rescinds their foreclosure or extends it to another date. During this time the home owner has moved out of the property and thinks their responsibility (except for the deficiency) is done. With no actual foreclosure taking place the property is still titled under the owner and any responsibilities with it remains.
This is one part of what is known as shadow inventory. It’s not quite a bank owned/REO but it’s also not in good standing.
There are a couple reasons this happens.
- The bank may not want to take responsibility yet. Backlogs of delinquent mortgages makes it very tough for banks to foreclose in a timely fashion or have a good control over their assets. Leaving it in foreclosure limbo buys them time to get other properties off their books.
- The foreclosure paperwork may be incomplete or filed incorrectly. In this case the bank may not have the right to complete the foreclosure so they either start over or move back a step.
- Third party requests. The owner may be working on a loan modification or alternative terms to cure the delinquency. In this case you’ve probably hired an attorney and know whether or not the foreclosure will take place.
In order to protect yourself you should always hire an attorney to make sure the correct foreclosure steps are taking place. You can also stay up to date by using the Washoe County Recorder’s website, the lien holder’s posting service, or third party sites like Foreclosure Radar to see when and if the foreclosure is taking place.
For more information on buying or selling a home in Reno and Sparks contact Broker Ricky Beach at (775) 750-1437 or Ricky@Resnv.com