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Health & Fitness

What is the difference between a short sale and Natural Sale?

Q: What is the difference between a short sale and a natural sale?
–Anonymous

A: What you term as a “natural sale” is actually known as a “conventional sale.” A conventional loan is any mortgage that is not guaranteed or insured by the federal government. A conventional loan is generally referring to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac. Conventional loans may be either “conforming” or “non-conforming.” Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. Nonconforming loans don’t meet Fannie Mae or Freddie Mac guidelines, but they are also considered conventional.

A short sale is a little-known alternative to foreclosure, once more commonly used in the real estate downturn of the early ’90s, and works like this: A homeowner falls behind on his or her mortgage payments, usually due to a job loss, rising debt payments, or both. Facing a situation in which the home value has fallen and cannot be sold for the amount of the mortgage owed, a short sale specialist can work out a deal with the lender to sell the home for whatever the market will bear. If the amount of the sale is for less than the amount owed on the mortgage, the lender gets the proceeds and discharges the remaining debt.

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Also known as a real estate short pay-off or a pre-foreclosure workout, a short sale is an agreement with a lender to accept less than the amount owed by a borrower via a sale of the property to a third party.
Lee Dworshak is a Realtor® with Keller Williams LA Harbor Realty in Rancho Palos Verdes, CA.
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A: A short sale is an attempt, or a request, that the lienholder (ie; bank) accept less money for the sale of the property than the current owners owe on their mortgage. It typically occurs with properties that were purchased around 2003-2005. Those same homes are not as valuable today as they were when they were purchased, which gives us the term ‘under water’. Unfortunately, people still need to move and sell, some will be able to sell via a short sale.

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Selling your property as a short sale is not cut and dry. Banks are not in businrss to lose money and sometimes they will hold you responsible for paying back the difference between what you borrowed and what the house sold for.

Buying a short sale property isn’t cut and dry either. It takes longer and there is more paperwork. Your offer has to be accepted by the seller(s), and their bank, and maybe the company that holds their second mortgage…. you get the picture, right? The house is still going to be priced at fair market value; don’t expect to get the property for pennies on the dollar. You lose the ability to negotiate the price because the sellers are not in a position to lower the price and are often not willing to do repairs. That doesn’t mean that you won’t get a nice place at a good price, just that the playing field is a tad different.

I hope that helps,
El
El Brant is a Realtor® with Wilkinson & Associates Real Estate in Wilmington, NC.

to search for short sales in Virginia, please goto my website

buyandsellnorthvirginia.com

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