What is a short sale?

A short sale refers to a real estate transaction where the 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. In order for a short sale to proceed, the lender must agree to accept the reduced sale price as full satisfaction of the mortgage debt, essentially allowing the seller to avoid foreclosure.

Engaging in a short sale can be beneficial for both the seller and the lender. For the seller, it provides an opportunity to mitigate financial setbacks and avoid the more severe consequences of foreclosure. For the lender, it can be a way to recoup some of the losses that would occur if the property were to go through foreclosure and then be sold at an even lower price.

The other options, while related to property sales, do not define a short sale accurately. For instance, selling a property at market value or for more than the mortgage amount does not involve the lender's acceptance of a loss, which is fundamental to a short sale. Additionally, a sale that occurs after foreclosure pertains to a different process and typically involves auctioning off the property rather than negotiating a sale price with the lender while it's still in the owner's possession.