What is a "short sale" in real estate?

A "short sale" in real estate refers to a situation where the property is sold for less than the outstanding balance on the mortgage. This typically occurs when the homeowner is experiencing financial difficulties and cannot keep up with mortgage payments, yet the current market value of the property has declined. In such cases, the lender may agree to accept a lower amount than what is owed in order to facilitate the sale and avoid the lengthy and costly process of foreclosure.

This definition highlights that the lender’s approval is crucial in a short sale, as they must consent to accept less than the owed amount to release the lien on the property. A short sale can provide relief to the homeowner by allowing them to sever ties with the property and avoid further financial burdens, while also enabling the lender to recover at least part of the mortgage owed.

The other options do not accurately define a short sale. For instance, the description of a quick sale with no inspections does not capture the essence of the financial aspect critical to a short sale. Similarly, lease-to-own agreements and foreclosure auctions represent different types of real estate transactions that do not involve the same financial circumstances and relationships between the homeowner and mortgage lender.