Sometimes, real estate investments are like bad marriages: The buyer starts with good intentions before running for the hills amid a combination of overwhelming expenses, bad tenants, or no tenants. Their abandoned homes are known as zombie foreclosures.
Unlike movie zombies, though, they don’t have to turn future buyers into zombie owners, too. In fact, they can often represent good investment opportunities.
The Rust Belt Is Rife With Zombies
According to a new report by ATTOM, a real estate data and analytics provider, out of 24.9 million investor-owned properties nationwide, 3.6% (882,336 homes) were vacant in the third quarter of 2025. The states with the highest number of zombie foreclosures were in the Rust Belt and Midwest, except Alabama:
- Indiana: 7.2%
- Illinois: 6.1%
- Oklahoma: 5.9%
- Alabama: 5.9%
- Ohio: 5.8%
ATTOM featured 135 metros in their report with a population of at least 100,000 residential properties and 100 in the preforeclosure process. Of these, 57% (77 areas) had zombie foreclosure rates that were below national numbers.
Investor homes have a higher chance of becoming abandoned eyesores due to the risk factors associated with flipping and renting. That hasn’t deterred other buyers from attempting to turn one person’s junk into another person’s treasure.
ATTOM CEO Rob Barber said in a press release:
“Vacant and zombie homes can hurt the value of surrounding properties and start a negative spiral in a local housing market. While we’ve seen the rate of zombie homes tick up a tiny bit this quarter, the overall rate of vacant homes and homes in the foreclosure process has remained remarkably steady. While there remain some markets with worryingly high rates of vacancies, as a whole, it appears that the nation’s buyers are quickly filling homes that become available.”
Some States See a Rise
Although increases in zombie foreclosures were generally in the single digits in 23 states, some saw a dramatic rise in numbers:
- Colorado: Up 115%—A jump of 25 to 58 zombie homes
- Washington: Up 114%—29 to 62
- Iowa: Up 84%—64 to 118
- North Carolina: Up 80%—50 to 90
- Oklahoma: Up 72%—43 to 74
Common Reasons Why Zombie Foreclosures Occur
So what causes homes to go all undead? There are a few reasons.
Financing
High interest rates have hurt buyers with adjustable-rate mortgages that have come due. CNN reported that data from Intercontinental Exchange, a global provider of technology and data, showed 1.7 million homeowners have bought homes with adjustable-rate mortgages since 2019. Often, investors involved in flips and BRRRRs utilize short-term financing, which requires refinancing.
Legal issues
Code violations, landlord-tenant disputes, title issues, and partnership disagreements are just a few of the legal issues that can cause a real estate investment to go awry, resulting in landlords walking away from their properties.
Tenants trashing the home
Many landlords have had to deal with bad tenants trashing their buildings upon being evicted. One of the most egregious incidents I have personally experienced was a tenant who poured cement into the toilets and the sewage pipe, creating a financial nightmare.
Bad contractors
Investors can sink or swim based on the contractor they use. Shoddy work that needs to be redone or contractors stealing money are common complaints that can cause an investor to fail on a project.
Lack of tenants
A shortage of qualified tenants can cause holding costs to outweigh the benefits for landlords.
Irresponsible investors
Sometimes, investors are the architects of their own downfall due to failing to keep up with repairs or not responding to a tenant’s needs, which can lead to an escalating problem.
The Wider Ramifications
A vacant house is an eyesore in a community, and multiple abandoned homes can cause bigger problems.
“Vacant and zombie homes can hurt the value of surrounding properties and start a negative spiral in a local housing market,” Rob Barber, CEO of ATTOM, said in his report. “While we’ve seen the rate of zombie homes tick up a tiny bit this quarter, the overall rate of vacant homes and homes in the foreclosure process has remained remarkably steady.”
How to Buy a Zombie Foreclosure
There are a few ways to locate a zombie foreclosure. First, it’s essential to understand the legal definition of it. Usually, it consists of a rental home in the process of being foreclosed upon, where the investor has walked away from the home, often believing the bank has taken title to it.
When the foreclosure has not yet been finalized, the house is in a state of legal limbo. No one is maintaining it, and the bank does not own it.
There are a few main steps to buying a zombie foreclosure:
- Track down the ownership status through property and court records.
- See if the homeowner or the bank still controls the title. A title search helps.
- Negotiate directly with the owner, or wait for the property to be auctioned off at foreclosure. Foreclosure listing sites, such as auction.com or ATTOM, also display the foreclosure status.
- If you haven’t already ordered a title search, do so now, and consider ordering an inspection (if permitted).
- Prepare to make a cash offer and have the funds available to start a rehab project.
Final Thoughts
A zombie foreclosure went bad for a reason. Determining the cause will help you decide whether to proceed with buying it. If the property is located in an area with limited rental activity or high crime statistics, it might be best to stay away.
However, if it was due to a partnership dispute, divorce, or the investor running into financial problems unrelated to their rental ownership, there’s no reason another investor might not succeed with the same home. Unfortunately, it’s not easy to find out this information. Talking to neighbors and local real estate agents can help determine what went wrong.
Zombie foreclosures can be a great source of deals for future investors, both for flips and long-term rentals. However, just because it’s abandoned and can be purchased at a discount does not automatically make it a good investment.
