The bank foreclosures have led to an increasing rate of home sales activity. A large number of properties are left vacant due to the problem of foreclosed homes. This problem has created a good real estate market for the first time buyers as they can purchase a home at a price that was something unbelievable for them a few years back. However, the buyers are needed to ask for both home inspection and home warranty. As put by David Goodwin, treasurer of the Home Warranty Association of California (HWAC), a home warranty is provided by the seller often in a transaction that involves traditional home selling activity.

It has been found that about 90 percent of the traditional home sale transaction in California included giving of a home warranty by the seller. In this foreclosure market, the seller of homes and properties are the banks. It is by all probability that they will not be willing to provide a home warranty. Moreover, the bank is not well aware of the condition of the home as the occupant was someone different. Hence, the bank will be unable to make the buyer know about the condition of the home. Therefore, it becomes very important for the buyer to ask for inspection as well as home warranty.

In case of a foreclosed home, a buyer must not expect that the home warranty will also include on items that were found during the inspection time. A home inspection is always a necessity as that will give a clear idea on whether everything is in proper condition or not. The home warranty is an added protection that protects a homebuyer against unnecessary expenditures like repair costs within the first year of the possession of home. A buyer should be well aware of the various problems involved in buying a home when it is a market of foreclosure. If the problems are not identified at the first stage, it may cost the buyer heavily later on.

The Home Warranty Association of California happens to be an organization for home warranty companies, which represents about 95 percent of the various real estate contracts that are sold in California. A home warranty provides warranty for the main operating systems as well as appliances of the home against any breakdown within one year after the deal is closed. To make home buying a fruitful business, one must ask for home warranty to have a great future.

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San Diego County has been reported with a sharp 9 percent increase in foreclosed homes in July from what it was in June. About 2,004 homes have received a foreclosure filing in July. Besides, there has been a massive 213 percent increase in the foreclosure filing as compared to 2007. This has hardly hit the real estate industry of San Diego County. This years filing happens to be the 40th consecutive month of the year after year hike in San Diego County foreclosed homes. There has been a default notice of about 3,006 last month. Although this is a 2.5 percent decrease from June but is an increase of 81 percent from what it was in 2007.

The prices of homes in the San Diego County are dropping as the investors and banks realize that low priced homes attract buyers. A large number of people are leaving their houses as they are finding it difficult to pay the mortgages. The tight credit terms and a weak economy are preventing the buyers from investing into the real estate market. The communities that have been reported with the maximum number of default notice in July, ranked by home foreclosures per 1,000 homes, were northeast Chula Vista, southeast Chula Vista, San Ysidro, Paradise Hills, east Escondido, and the 91913 ZIP code.

In July, one in every 182 California homes received a foreclosure filing, which included either auction sale notices, or default notices, or bank repossessions. There were foreclosures on 72,285 properties in California in July. There was a 5 percent increase in California foreclosed homes from June and 85 percent increase from July of last year. Mark Goldman, a real estate finance instructor of San Diego State University has said:

“Foreclosures roar on. What will turn real estate around is the ability of people to pay more for their houses. That won’t happen for a while. The middle class is losing ground at an unprecedented rate.”

Susie Richard, a homeowner in Escondido who bought her home in 2003, has been successful in avoiding foreclosures on her property. She took help from a nonprofit organization in San Diego named Mabuhay Alliance that did a loan modification by which her interest rates became low. She said that after getting no response from her lending institution who said that they can do nothing about it, she resorted to take help from Mabuhay Alliance. It has been observed that new foreclosures are entering the real estate market much faster than the already existing foreclosed homes.

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At a conference on community stabilization in the wake of the housing crisis in Los Angeles, the President of the San Francisco Federal Reserve Bank, Janet Yellen, has expressed her concern about the raising rate of foreclosure. She is very much worried about its negative effects on not only real estate owners but also on the society. According to Yellen, it would be alarming to the U.S. economy, too. She has said that record high commodity and crude oil prices along with credit policies and crisis in the real estate market are the responsible factors for this situation.

She has evolved her view towards the monetary policymakers to vigilant the situation closely in an order to meet a low and sustainable inflation rate and to maximize economic growth and sustainable employment. She has included that it’s “an urgent problem” for which both the private and public sectors should take initiatives and control further cases of unnecessary foreclosure.

She has focused on the rising rate of foreclosure in her district also. To Yellen, the people facing this situation as a result of sudden and substantial rise in foreclosure, in Arizona, California and Nevada are of more concern compared to those facing it for a long while. She is afraid of the ‘devastating’ impact of foreclosure; even on the surrounding communities along with the real estate property owners.

For borrowers, foreclosures add more hardships to their lives. They are subjected to loss of their home equity and impaired credit, says Yellen. She adds that it may reduce their chances to live in a ‘stable and decent’ housing environment, and disrupt them from participating in the labor market.

However, for the surrounding communities, this rising number of foreclosed properties initiates the process of the “self-reinforcing cycle of decline” as the Fed Bank President calls it. According to her, this rising rate affects the local real estate market in a way that can lead to add more foreclosed properties to the list.

Yellen has said that the condition is worse for people living in the lower income groups. More and more people belonging to these communities are prone to lose their homes and equity. As a result of this, the ongoing process of neighborhood revitalization would also be affected. The effect of foreclosure hurts the low income communities the most. She has added it needs strong, sound and direct responses at local as well as federal levels to challenge the situation and control the sky-high rate of foreclosure.

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