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Irina Shoket
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FAQ’s with Irina & Jeff Shoket

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Frequently Asked Questions Page


The one reality about today’s housing market is that many people have more questions than answers. The following information is intended to help you or someone you know better understand your situation.


Short Sale Questions



Do I qualify for a short sale?

The qualifications for a short sale include any or all of the following:

  • Financial Hardship – There is a situation causing you to have trouble affording your mortgage.


  • Monthly Income Shortfall – “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.


  • Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.


What is a mortgage modification?

A mortgage modification is a process through which your mortgage lender changes any or all of the following:

  • Your interest rate


  • Your principal balance (through a reduction)


  • Your loan terms (example: from an adjustable to a fixed rate)

This process can allow borrowers to stay in their property when they can no longer afford their current mortgage payments.



Why would a lender modify my mortgage?

Lenders have realized that in some cases it is better for them to work with current borrowers to lower payments or possibly improve terms in order to keep homeowners in their properties. The average foreclosure can cost a lender from 35-50% of the value of a property, so keeping borrowers in their homes is a good option for everyone.



What do I need to qualify for a mortgage modification?

According to the Making Home Affordable Web site (www.MakingHomeAffordable.gov), you will need the following information for your lender to consider a modification::

  • Information about your first mortgage, such as your monthly mortgage statement

  • Information about any second mortgage or home equity line of credit on the house

  • Account balances and minimum monthly payments due on all of your credit cards


  • Account balances and monthly payments on all your other debts such as student loans and car loans

  • Your most recent income tax return

  • Information about your savings and other assets


  • Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources
    If applicable, it may also be helpful to have a letter describing any circumstances that caused your income reduce or expenses to increase (
    job loss, divorce, illness, etc.)

This process can allow borrowers to stay in their property when they can no longer afford their current mortgage payments.



How do I qualify for a mortgage modification?

The first call you make should be to your lender, have the information above ready to discuss with them and call your customer service line to ask them what options you have available. If the person you speak with does not understand what you are asking, you can ask to be referred to one of the following departments (different lenders have different names for these departments):

  • Loss Mitigation

  • Mortgage Modification

  • H.O.P.E.

Prior to contacting your mortgage lender you can quickly complete an eligibility test at (www.MakingHomeAffordable.gov). This test will let you know if you are eligible for a modification through the government-sponsored Home Affordability and Stability Program (HASP).


For a list of mortgage lenders and services, visit (www.HopeNow.com)



What is a Home Affordable Refinance?

If Fannie Mae or Freddie Mac owns your mortgage, you may be eligible for a Home Affordable Refinance. This will allow you to refinance your home and often lower your payments.



What if I don’t qualify, can’t afford my home, and owe more than it’s worth?

You are not alone and foreclosure is not the only option. If your mortgage lender or servicer will not work with you to reduce your payment, you may want to consider a short sale. Agents with the Certified Distressed Property Expert® Designation have undergone extensive training in how to process and negotiate short sales.

A short sale allows you to sell your home for less than what you owe and avoid foreclosure. Speak to your market expert to see if you may qualify.



What are the qualifications for a Home Affordable Refinance?

According to the resources released by the government, following are a list of qualifications:

  • You are the owner occupant of a one- to four-unit home

  • The loan on your property is owned or securitized by Fannie Mae or Freddie Mac (see Useful Links)

  • At the time you apply, you are current on your mortgage payments (you haven’t been more than 30 days late on your mortgage payment in the last 12 months, or if you have had the loan for less than 12 months, you have never missed a payment)


  • You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house

  • You have income sufficient to support the new mortgage payments, and the refinance improves the long-term affordability or stability of your loan

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Foreclosure Questions



What is the Foreclosure Process?

Foreclosure is a process that occurs over a period of time, involving three major stages. Interested homebuyers can make a purchase offer and potentially acquire property at any point in the foreclosure process. However, there are different variables to consider at each stage, and different parties involved, depending upon how far the home has proceeded down the path towards foreclosure.


STAGE 1: PRE-FORECLOSURE

When homeowners default on their mortgage, their property is considered to first be in a state of pre-foreclosure. Lenders are typically quick to respond to that first late payment, with phone calls to the borrower.

How the foreclosure process actually proceeds from this point forward varies greatly from state to state. It’s important to know, for example, how your state determines property ownership prior to foreclosure, since this largely dictates which steps will be taken and how long each step will take.

Buyers may find that properties that are in the pre-foreclosure period are attractive investments. While it’s unlikely that a highly discounted price can be negotiated, especially for desirable properties, there are several advantages to purchasing at this stage.

First, there may be less competition from other buyers before the property is put up for public sale. Also, if your agent approaches the current homeowners with sensitivity to their situation, you’ll improve the odds that a cooperative agreement can be reached, eliminating many of the problems and uncertainties that make purchasing foreclosure properties in auction sales a risky business.



STAGE 2: SALE/AUCTION

If the lender and borrower are unable to work out a solution during the pre-foreclosure stage, the lender will take steps to sell the property to new owners. Following a notice of sale, a foreclosure property is typically listed for sale at auction. The timing and procedures of these sales vary by state and, to some extent, sales terms will be determined by the lender. For example, an auction can occur through a public sheriff’s sale, or through a private party. Some lenders may even opt for a short sale, which means the property is sold for less than the amount of money owed, simply to remove a non-productive asset from the books.

Frequently, the best bargains in distressed properties can be found at auction sales, although numerous pitfalls can be encountered. First, it’s fair to say that you probably won’t have complete information about what you’re purchasing. Because defaulting homeowners frequently still occupy the home at this point, and are not likely to open their doors to show you around, you won’t be able to see beyond the exterior, much less bring in inspectors. In this type of sale, there are no requirements to disclose flaws; properties are sold “as is,” without any warranties.

It may also be difficult to determine if there are any old debts that could surface later as liens on the title. For example, you may become obligated to settle with the contractor who put a new roof on the home, but was never paid. And if the old homeowners still occupy the home, you’ll have to contend with the awkward business of evicting them, facing the additional risk that they will damage the property before they vacate.

Another challenge can be paying for the home. Usually, public sales require cash payments, meaning that your financing will need to be in place well in advance of the auction.


STAGE 3: REAL-ESTATE OWNED (REO)

If a foreclosure home does not successfully sell at auction, it moves into the lender’s inventory and is considered a real-estate owned (REO) property. Generally speaking, lenders don’t like to hold non-performing assets, especially ones that require upkeep and maintenance, so they may be motivated to sell. At the same time, lenders still want to maximize their profits and are unlikely to accept deep discounts.

Buying foreclosure property at the REO stage is typically the easiest and most straightforward approach. Many of the risks that are present at the auction stage have now been eliminated. However, the potential return on your investment has also been reduced. On the other hand, expenses such as taxes and liens, that aren’t generally covered in an auction sale, may be covered by the lending institution in an REO sale.

If the home is held by a smaller bank, you and your buyer’s rep may be able to negotiate a purchase directly with the lender. It’s more likely, however, that you’ll be working through an outside real estate representative who has been retained independently by the bank.



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60/90 Questions



How Does Proposition 90 work?

Under Proposition 90, California property owners who are 55 years or older may be able to qualify to transfer the assessed valued of their principal residence sold in County "A" to their new residence in County "B". County Assessors require a copy of the tax bill from the other county and a copy of the applicant’s birth certificate to be included with the application, along with a copy of the grant deed for the new purchase and a copy of the closing statements of both sale and purchase.

 

The following list summarizes eligibility requirements:

  • The seller of the original residence, or a spouse residing with the seller, must be at least 55 years of age, as of the date that the original property is transferred

  • The replacement property must be of equal or lesser "current market value" than the original

  • The base year value of the original property cannot be transferred to the replacement dwelling until the original property is sold

  • The replacement property must be purchased or newly constructed within two years (before or after) of the sale of the original property

  • The owner must file an application within three years following the purchase date or new construction completion date of the replacement property

  • This is a one-time only filing. Proposition 60/90 relief cannot be granted if the claimant, or spouse, was granted relief in the past

  • Proposition 60/90 relief includes, but is not limited to: single family residences, condominiums, units in planned unit developments, cooperative housing, corporation units or lots, community apartment units, mobile homes subject to local real property tax, and owners’ living premises which are a portion of a larger structure

  • The taxpayer is not eligible for the tax relief until they actually own AND occupy the replacement dwelling as their principle residence

Contact the co-operating county in question at the following numbers in order to verify that they are currently accepting the value transfer under Proposition 90, and find out what their additional qualification requirements are:

Los Angeles: (213) 974-3101
Ventura: (805) 654-2181
Santa Barbara: (805) 568-2100

If you have any further questions Read More…


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1031 Exchange Questions



What is a 1031 Exchange?

The exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.


This is a much more complicated subject and should be answered by a qualifed professional. Contact your tax account for further information.


Links Reference:

1031 Exchange Made Simple
Like-Kind Exchanges - Real Estate Tax Tips (IRS)
Internal Revenue Code section 1031 (Wikipedia)



1031 Exchange – “like-kind” properties?

My clients often ask me: What is like-kind properties? Can we sell a single family home and buy a condominium? Can I sell commercial office building and buy an apartment building? The answer simply is yes. IRC Section 1031 does not limit “like-kind” property to certain types of real estate. The term refers to the nature or character of the property and not to its grade or quality.


The types of real estate which can be exchanged are extremely broad. The tax code states any real estate held for productive use in a trade or business or for investment - whether improved or unimproved is considered “like-kind”. Some examples of like-kind real estate are:

  • Unimproved for improved property

  • Commercial building for vacant land

  • Industrial property for rental resort property

  • Single family home for a condominium or industrial property

As you can see from the above examples, the definition of like kind under a tax deferred exchange is very broad. So what is NOT considered like kind real property?

  • Personal Property

  • Primary Residence

  • Property held primarily for resale

  • Stock in trade

Now, this is not to say you cannot do an exchange with personal property. Qualifying personal property must be “held for productive use in a trade of business or for investment. In general, qualifying properties must both be in the same General Asset Class or within the same Product Class.

As always, it is critical for any taxpayer to review any transaction with their own tax/legal advisors before entering into any 1031 Exchange.

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FAQ’s On:

Short Sale

Foreclosure

60/90

1039 Exchange



Find Short Sale Properties


Find Forecloser Properties



 

Irina & Jeff Shoket, are committed to your success and providing you with top quality service every step of the way. We want to be your source of information in the real estate process, your trusted consultants and passionate advocates. Representing the best of real estate has to offer in Conejo Valley, Simi Valley, Ventura and Los Angeles Counties areas. Servicing Real Estate Opportunities in the cities of the Conejo Valley and surrounding regions of Ventura County and Los Angeles County:

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