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Irina Shoket
BRE#: 01246477

 

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Jeff Shoket
BRE#: 01899853

 
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Short Sale Help and Information
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Conejo Valley Short Sale Home Rescue


Short Sale Defined (What is a short sale and how does it work):


A Short Sale means that the seller is trying to sell the property for less money than is owed to the bank. Since the bank is going to take a loss if the property sells, the bank must sign off and agree to the offer. Initially, we make the offer to the seller and negotiate directly with the seller. Once we reach an agreement, the offer is then sent to the bank for approval. This is the part of the process that can take a while.

It typically takes the bank 2-5 months to approve an offer. During that time, we are free to make offers on other properties. We would not put down a deposit and open escrow on a short sale until we receive the bank’s approval. If we have found a different home in the meantime, it’s ok for us to pursue the second property and forget about the short sale. We are not committed to the short sale until the bank approves our offer and we put our deposit into escrow.



Short Sales vs Foreclosure:


Losing your home to foreclosure is one of life’s most unpleasant experiences. It can also affect you long after your home is history by devastating your credit. Regrettably, most people cannot be sure that they will remain safe from foreclosure because they can’t foresee the unexpected. Situations such as a serious illness, a major accident, divorce or job loss can happen to anyone. Understanding the available alternatives, should the worst occur, is always a good idea.



Foreclosure Should Be Your Last Option:


Despite what some people might say, foreclosure should always be your last option. The end result of a foreclosure is the lender taking your house. If that isn’t enough, your credit report will be in terminal condition for many years to come, worsening an already bad financial situation and making it very difficult to obtain any other kind of credit. There is no upside to foreclosure. It should be avoided at all costs. A short sale is a popular option for homeowners mired down with financial problems. In this case, you would sell your home for less than what you owe your lender; the biggest problem you could face is getting your lender to agree to a short sale, but that's where I come in.. I'd advise pursuing this option the minute you realize that you are falling behind in your payments and most likely won’t be able to catch up. The longer you wait and the greater the amount you are in arrears, the less likely it becomes that your lender will cooperate.

A short sale may also have a negative effect on your credit score, sometimes lowering it by 100 to 200 points. However, This can be overcome much more quickly than a foreclosure, especially if you manage to retain one or two credit cards and keep them current. Perhaps equally distressing, until recently, the Internal Revenue Service frequently deemed the difference between the mortgage balance and the amount realized from the short sale to be taxable as income despite the fact that the debtor never saw a dime of it. There is new federal legislation called the Mortgage Forgiveness Debt Relief Act 0f 2007 that just went into effect on January 1st, 2008. The new act essentially eliminates this problem.



Don’t Do This Alone:


Having a professional work on your behalf is crucial. Facing foreclosure is a scary thing, and you need someone that knows who to talk to, when to talk to them, and how to handle all the paperwork to get the deal done.

You Need An Experienced Short Sale Expert (Irina and Jeff Shoket Realtor® HAFA Specialist)

Give me a call at (805) 418-2523 I would be glad to help help where ever I can. I am a short sale realtor here to answer your questions and get you in the right direction.



$3,000 HAFA Seller Credit:


The Federal Government recently began its first program to offer a short sale, or a deed-in-lieu, to rescue homeowners from foreclosure, while forgiving the difference between the sale price and the amount owed on mortgages. Home Affordable Foreclosure Alternatives, or HAFA, is intended to reduce the need for potentially lengthy and expensive foreclosure proceedings.


Administrators see it as a substantially better outcome than a foreclosure sale for borrowers, investors and communities. The program’s goals include minimizing the time a property may sit vacant and subject to deterioration, a problem that has plagued the worst hit neighborhoods in some states. But its greatest benefit is to the desperate homeowner who could not be helped by the more common foreclosure prevention method: a reduction in mortgage payments. Those eligible for HAFA have either failed to qualify or were not able to finish a trial with the government’s primary $75 billion Home Affordable Modification Program, or HAMP.

The main mortgage relief program continues to be revised as criticism mounts that too few homeowners have received permanent relief, and even fewer have been granted mortgage write-downs.


In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds may be less than the total amount due on the primary mortgage and any subordinate lien. But with HAFA, the difference is forgiven, and the seller can even qualify for up to $3,000 in relocation assistance. In a deed-in-lieu of foreclosure (DIL), the borrower voluntarily transfers ownership of the mortgaged property to the servicer in full satisfaction of the total amount due. The servicer will be paid $1,500 to cover administrative and processing costs for a short sale or DIL. The investor will be paid a maximum of $2,000 for allowing a portion of the short-sale proceeds to pay subordinate lien holders.


Under HAFA, a list price will be determined for the home and the seller is provided an “acceptable sale proceeds” figure – the minimum amount that the lender must receive after sales costs – from the sale of the home. When an offer is made on the home, the seller will submit the required documentation for approval. Once the sale closes, the seller will be released from all responsibilities for repaying the mortgage. In addition, the seller will receive up to $3,000 to help pay some expenses.  The check will be paid by the settlement agent as part of the closing.


If there is money left over from the sale after paying the amount owed on the mortgage, plus the approved sale costs, the seller will not be eligible to receive the $3,000. The short sale must be “at arm’s length.”  The property cannot be listed with or sold to a relative, friend or business colleague. The seller must also agree to share information about outstanding mortgages, liens, credit history and relocation plans with brokers and other third parties that could be involved in the transaction, including U.S. Treasury employees and its financial agents, Fannie Mae and Freddie Mac.


The HAFA servicer will follow “standard industry practice” and report to the major credit reporting agencies that the mortgage was settled for less than the full payment. “We have no control over, or responsibility for the impact of this report on your credit score,” HAFA program literature states.

For more information: CONTACT ME today for more Details!



Some Good News - Approved Short Sales:


Frequently, by the time a bank has approved an offer, the buyer has wandered off and bought something else. In that instance, the home may be listed as an Approved Short Sale and the listing agent will then know what price the bank has approved. If you make an offer at the previously approved price, the time to receive the bank’s approval of your offer is significantly shortened. You could actually receive approval within 2-4 weeks. All of the other risks involved in a Short Sale still apply, but the waiting time is significantly reduced.


This is a brief rundown of some of the intricacies of making an offer on a Short Sale. It is possible to get a nice home for a good price, however, Short Sales come with additional risks. It is important to be aware of the complexities and to go into the process with your eyes wide open.


Short Sale Pit Falls:


In order for a bank to consider a short sale, the sellers must prove that they have a hardship and can no longer make their house payments. If a seller has not completed the hardship package of paperwork and received the bank’s agreement that a hardship exists, a short sale may not even be possible. When a short sale is new on the market, this step has often not yet occurred.
Banks normally do nothing to assess the value of the property until an offer is received. Many real estate agents price their short sale listings well below market value in an effort to get an offer quickly and get the process started. It’s important to remember that the list price on a short sale typically has nothing to do with the price that the bank will accept. The bank’s bottom line is often higher than the list price.


There is no guarantee that the bank will accept our offer. The seller and the bank can continue to offer the property for sale and collect other offers that may be better than ours. If they receive a better offer than ours, they may come back and give us the opportunity to match the higher offer. Then again, they may just go with the higher offer. Sometimes there is more than one loan on the property. Each bank that has a loan on the property, which will not be paid in full, has to agree to our offer. Sometimes the first lien holder may agree to the offer, but the second or third lien holders may not. If all lien holders do not agree to our offer, we cannot proceed.


Most sellers that are trying to do a short sale are no longer making their house payments. Therefore, there may be a Notice of Default filed on the home. If that is the case, the property may be foreclosed on and sent to auction even though we have written an offer on it. This can occur even after the bank has accepted our offer. Therefore, we may have already spent money on your inspection and appraisal and the house could still be sold at auction. If that happens, we cannot recoup the money you have spent. If we receive bank approval and open escrow on a short sale, there are two important things to keep in mind. The Seller has no equity in the home and the bank will not want to spend anything on the sale, since they are already losing money. Therefore, you need to expect that no repairs will be made to the property as a result of our physical inspection.

Banks involved in Short Sale properties often times will not approve the expense of a Home Protection Plan, HOA Transfer Fees and sometimes even termite repairs will not be done. (This does not mean that we cannot negotiate to have the Seller/Bank give you a credit towards your closing costs. It just means that more things will be on your side of the balance sheet and your total closing costs will be higher. Therefore, we will need to get a higher dollar amount in credit from the Seller/Bank and will be subsequently paying a higher price for the home. If the Seller/Bank will accept $300,000 for a property and we would normally need $5,000 in closing costs, we would have to pay the Seller/Bank $305,000 for the home. However, in a Short Sale, if we have additional closing costs, we may need to ask for a credit of $8,000 instead of $5,000 and therefore would have to pay $308,000 for the home instead of $305,000.)


If you decide to cancel your escrow within the terms of the contract, you may have trouble getting your deposit returned. If the Seller has left the state, or is otherwise unavailable, he or she may not sign the necessary forms to release your deposit. For this reason, we never recommend offering more than $1,000 as a good faith deposit on a Short Sale. When you make an offer on a Short Sale, you need to be prepared to lose your deposit if the worst case scenario comes to pass.

 

Home Affordable Foreclosure Alternatives (HAFA) Program

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7 Things-Every Home Buyer Should Know About Short-Sales

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Considering A Short Sale? Here Are Some Pitfalls You Must Be Aware Of!

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Why Buyers and Sellers Should Seriously Consider Short Sales

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The Seven Most Dangerous Short Sale Myths

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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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