By Bruce Cathcart

In honor of Halloween this week’s article will address “Vampire REOs and Zombie Foreclosures”. These are the two terms coined by the foreclosure tracking company RealtyTrac to describe the latest trend regarding the “Monsters of the Housing Market”. When I first heard the terms I imagined perhaps Dracula’s castle or even 1313 Mockingbird Lane (the Munster’s mansion) had been foreclosed upon and was up for auction… but no such luck!

According to RealtyTrac, “Vampire REOs are bank-owned homes that are still occupied by the previous homeowner who was foreclosed on. On the surface these properties often will look like normal, non-distressed homes, but beneath the surface they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these homes to try and recoup their losses on soured loans.”

“Zombie foreclosures are homes that are still languishing in the foreclosure process but have been vacated by the homeowner being foreclosed. Often these homes are more obviously distressed, falling into disrepair with no one to perform regular maintenance and upkeep.”


This could be some scary news for sellers and builders of new homes if all of sudden the banks decide to put these homes on the market for sale. An increase in inventory, especially adding distressed sales like REOs onto the sales market, could change the current seller’s market back to a buyer’s market in a hurry! On the other hand, this would be welcome news to buyers currently struggling to find a home to purchase. Trick or treat?

According to RealtyTrac there are about 250,000 vampires and 150,000 zombies across the nation that when added together equal 400,000 properties or approximately 10% of our nation’s current annual sales volume. Closer to home we have approximately 10,801 REOs in the Riverside/San Bernardino statistical area of which 52% are currently vampires. If you believe that the banks were smart enough to hold these properties off the market in order to create the lack of inventory and increase prices in the first place then there is no reason to worry about them dumping all of these properties on the market at once, only to crash the market they worked so hard to create. On the other hand, if you believe that the banks created these vampires and zombies through their inability to properly manage the “foreclosure to sale process”, then at some point it might be possible to see large numbers of these properties come on the market in the not so distant future.

Here is the reality of the situation as I see it. The zombies are likely candidates to become short sales and if not that, regular REOs. Their current numbers are not enough to have a dramatic effect on the Coachella Valley real estate market. As they trickle onto the market, as they have been doing for the last year and a half, they will continue sustaining inventories and providing good opportunities for homeowners and investors. They will slow the recovery of the housing market, but the zombies alone are not a significant issue. The vampires are the sneaky ones and when added to the zombies can have a more significant effect on our local real estate market if added to the inventory all at the same time. But I just don’t see that happening. The vampires are “occupied” properties. Did you ever try to evict 5,616 unwilling tenants from their own homes at the same time? I have no doubt that these homes will eventually enter the market but most likely at a pace that will continue to slow the recovery of the housing market, but not reverse it.

Vampire REOs and Zombie Foreclosures are fun and somewhat descriptive names for the Frankenstein Monster of a housing market that the banks created in the first place, but we need not be afraid of them. Happy Halloween!

This week’s real estate tip: Buyers and Sellers should not be afraid to make a decision to buy or sell in the current market. As always, seek advice from your trusted real estate agent about your personal situation and make your decision based upon what we know is happening today, not what might happen tomorrow.

Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “Your Friendly Professionals” and can be reached by email at or visit his website at


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