What is a "short sale" in real estate?

A "short sale" in real estate refers to a situation where a property is sold for less than the amount owed on the mortgage. This typically occurs when the homeowner is facing financial difficulties and cannot continue making mortgage payments, leading them to seek a way to sell the property without further financial loss. In a short sale, the lender must approve the sale because they are agreeing to accept less than the owed amount, which can help the homeowner avoid foreclosure and mitigate some of their financial burdens.

This definition and understanding of a short sale are crucial, especially for real estate professionals, as it involves negotiations with lenders and has implications for the seller's credit score and debt relief. Understanding the dynamics of a short sale allows agents to properly guide their clients through the process, setting realistic expectations regarding timelines and potential hurdles in securing lender approval. Other options do not accurately describe a short sale and focus on different aspects of real estate transactions.