What Are Zombie Condos

Key characteristics of zombie condos

• Abandoned condo foreclosures: Zombie condos are properties where homeowners have defaulted on their mortgage and moved out, mistakenly believing the foreclosure process is complete

• Lack of responsibility: These neglected condominium properties are left in limbo, with neither the lender nor the homeowner taking responsibility for maintenance or upkeep

• Deteriorating condition: Due to neglect, zombie condos often fall into disrepair, becoming eyesores in their communities

• Negative impact on neighborhoods: These abandoned condo foreclosures can bring down home values in the surrounding area and create safety concerns

• Potential for illegal occupancy: Abandoned zombie condos may attract illegal squatters, further complicating the situation

Prevalence and trends of zombie condos

• Increasing numbers: As of Q2 2023, there were 8,752 zombie properties in the US, up 7.5% from the previous quarter and 15.6% from the previous year

• State-specific rates: States with the highest zombie property ratios per residential homes are New York (1 in 2,140), Ohio (1 in 3,615), Iowa (1 in 4,480), Illinois (1 in 4,687), and Florida (1 in 5,926)

• Small fraction of total housing: Despite the increase, zombie properties represent only a tiny fraction of the US's 101.3 million total residential housing stock

Causes of abandoned condo foreclosures

• Backlog of default notices: A buildup of unprocessed foreclosure notices can lead to distressed homeowners abandoning their homes prematurely

• End of pandemic moratoriums: With the lifting of pandemic-related foreclosure moratoriums, lenders are now pursuing payment from delinquent homeowners who are no longer in forbearance

• Misunderstanding of foreclosure process: Some homeowners mistakenly believe that moving out completes the foreclosure, leading to abandoned properties

Impact of zombie condos on condo associations

• Financial strain: Neglected condominium properties can lead to unpaid association fees, putting pressure on condo association budgets

• Increased insurance costs: Associations may face soaring insurance premiums, which have doubled or quadrupled over the last year in some areas

• Special assessments: To cover shortfalls, associations may need to implement special loss assessments, requiring remaining owners to pay additional fees

Opportunities for investors in zombie condos

• Discounted purchases: Abandoned condo foreclosures can often be bought at a significant discount due to their poor condition and motivated sellers

• Renovation potential: Investors can renovate and flip these neglected condominium properties for a substantial profit or rent them out

• Less competition: As zombie condos are often off the market, investors may face less competition from other buyers

FAQ

What are zombie condos?

Zombie condos are abandoned condominium units in foreclosure where neither the owner nor the lender takes responsibility for the property. These neglected condominium properties often fall into disrepair, negatively impacting property values and community safety.

How do abandoned condo foreclosures become zombie condos?

Abandoned condo foreclosures become zombie condos when homeowners default on their mortgage and move out, mistakenly believing the foreclosure process is complete. The property is left in limbo, with neither the lender nor the homeowner taking responsibility for maintenance or upkeep.

What are the main characteristics of neglected condominium properties?

Neglected condominium properties, or zombie condos, are characterized by their deteriorating condition, lack of maintenance, and negative impact on surrounding neighborhoods. They often become eyesores, attract illegal squatters, and can lead to decreased property values in the area.

How prevalent are zombie condos in the United States?

As of Q2 2023, there were 8,752 zombie properties in the US, representing a 7.5% increase from the previous quarter and a 15.6% increase from the previous year. However, these abandoned condo foreclosures still represent only a tiny fraction of the country's total residential housing stock.

What opportunities do zombie condos present for investors?

Zombie condos, or abandoned condo foreclosures, can present opportunities for investors to purchase properties at significant discounts. These neglected condominium properties can be renovated and flipped for profit or rented out. Additionally, investors may face less competition when pursuing these off-market properties.