What is a "short sale" in real estate?

A short sale in real estate occurs when a property is sold for less than the outstanding balance on the mortgage. This situation typically arises when the homeowner is facing financial difficulties and cannot keep up with mortgage payments, leading to the need to sell the property. The lender must approve the transaction, as they are essentially agreeing to accept a lower amount than what is owed.

This process allows the homeowner to avoid foreclosure and is often seen as a way for the lender to recoup a portion of the loan rather than none at all in the event of a foreclosure. In contrast, other choices focus on different aspects of real estate transactions. While a traditional mortgage lender may be involved in various types of sales, including short sales, it does not specifically define a short sale. Similarly, a sale at market value or a quick cash transaction does not capture the unique financial circumstances of a short sale where lenders agree to accept less than the mortgage amount due.