One in five people who receives credit counseling before filing for bankruptcy cites avoiding of foreclosure as the reason they are choosing bankruptcy. This information was collected by the Consumer CreditCounseling Service of Great Atlanta.

Any person who is filing for bankruptcy is required to receive credit counseling. Under Federal bankruptcy laws, individuals who file for bankruptcy under Chapter 13 are protected from foreclosure as long as they continue to make their monthly mortgage payments. Once their bankruptcy plan has been approved, they must continue making their mortgage payments to avoid the risk of foreclosure.  These same people also often file for a loan modification which enables them to reduce these monthly mortgage payments.

Foreclosure hurts an individual’s credit for at least seven years, and property owners are going to any length to avoid it. Another option is a Short Sale which hurts credit for only 2-3 years and allows the homeowner to sell their property for less than is owed on the current mortgage.

Many homeowners in San Diego County are hoping that the housing market is finally hitting bottom. But a report last week by  the Government Accountability Office suggests that the country may only be a little more than halfway  through the number of foreclosures resulting from the housing bubble.

Other experts now suggest that we may soon be hit with another wave of foreclosures because many homeowners have been laid off during the current recession and can no longer make their mortgage payments.

As of March 31, the GAO says, 1.6 millionhomes that were purchased with risky mortgages have been foreclosed. About 1 million more of these mortgages are either seriously delinquent (90 days past due) or already have entered the foreclosure process.

Whenever unemployment rises, there is a corresponding rise in foreclosures. Now, San Diego County is showing a decline in the number of foreclosures, but real estate analysts say that is because the Legislature imposed a 90-day moratorium on foreclosures beginning June 15.

Once this moratorium is lifted on Sept. 15th, there’s going to be an avalanche of foreclosures hitting the system. The fall and winter should be a time when real estate investors will be actively buying these newly-foreclosed properties.

For buyers, this could be good news. They will have more options on properties to buy at greatly-reduced prices. However, many people are always after the same property, and buyers must have lender pre-approval and be ready to go when they see the property they want.

Lower priced homes are triggering bidding wars, and many first-time buyers are being beat out by investors in the current market. The problem is centered in newer, lower-priced communities that first-time buyers, who are often young families, can afford. Many of these homes are foreclosures and offer the first-time buyers a much lower price than these same homes sold for just a few years ago.

In San Diego County, many areas of Oceanside, Vista, and San Marcos are affected by these bidding wars. Often, buyers put in offers on as many as 10-15 houses, and they still don’t have their offer accepted.

These low-priced properties often attract investors who buy many of them at one time. These same investors bought real estate during the boom period and now they are stocking up on real estate properties and often buying them with cash which beats out the first-time buyers.

Often, these houses are sold for well above the list price, because so many offers drive up the price. First-time buyers must come with a pre-approved, very solid loan and be ready to close escrow in as short a time as possible. These situations will continue as long as the high number of foreclosed homes continues to move through the market.