Governor Schwarzenegger signed into law the first major bill designed to curb more foreclosures in California this past Tuesday. The bill is comprised of three main aspects:

1. Lenders are required to provide homeowners with more, and earlier, warnings that they are headed towards defaulting on their home loans.
2. Renters will now be given more time to find new living arrangements when they are evicted by a landlord who is losing the property to foreclosure.
3. Local governments will be authorized to force lenders to maintain vacant property after a foreclosure.

You can read more about the new law in the Los Angeles Times article titled California Senate passes mortgage default warning bill.

Aspects #1 and #3 of this bill have the potential to make immediate impacts on anyone looking to buy a home. By requiring lenders to provide homeowners with more warnings about potentially defaulting, the government is hoping that fewer homeowners will actually default. If this plays out accordingly, it means there will be fewer foreclosures and bank owned (REO) properties coming onto the market each month. This, in turn, means the available inventory of homes for sale will be reduced and the corresponding demand for each house will likely rise … read this as: house prices will go up! Aspect #3 is also likely to increase house prices. By forcing lenders to maintain vacant properties, there will be fewer neighborhoods negatively impacted by REO eye-sores - the property with boarded up windows and a yard full of overgrown weeds. Because of this, distressed neighborhoods won’t have their overall value degraded to the same extent as before … as we all know, nicer looking neighborhoods demand higher prices.

The current inventory of available houses in Contra Costa County is extremely high, and the longer a property lingers on the market the less attractive it becomes. Questions start to be asked as to why no one has already bought it: Is it overpriced? Does it have unseen issues with the roof or foundation? What is causing everyone to pass on this home? Well, as the Washington Post article Freshening an Old Listing, and Other Tips for Worried Sellers explains, some sellers are trying to sidestep this problem by having their property re-listed in the MLS so its Days On Market (DOM) value will reset. The thing to keep in mind, however, is that a good buyer’s agent will do the necessary research to see past this re-listing technique and will evaluate the property for what it is worth based on today’s demand.