What is a short sale in real estate?

A short sale in real estate refers to the sale of a property for an amount that is less than the outstanding balance on the mortgage. This situation typically arises when the homeowner is facing financial difficulties and can no longer afford the mortgage payments, potentially leading to foreclosure.

In a short sale, the lender must approve the transaction because they are agreeing to accept less than what is owed on the mortgage. This process can allow the homeowner to avoid foreclosure and provide the lender with a better alternative, as they often prefer a short sale to the lengthy and costly process of foreclosure.

Thus, the essence of a short sale is that it occurs at a price lower than the mortgage amount, which highlights the financial distress faced by the seller and the negotiations required to complete the sale.