What is a short sale?

A short sale refers specifically to a situation where a homeowner sells their property for less than the total amount owed on the mortgage. This occurs when the homeowner is in financial distress and unable to maintain their mortgage payments, leading them to seek a way to sell the property to avoid foreclosure. In a short sale, the lender must agree to accept the sale proceeds as full satisfaction of the mortgage debt, which is usually less than the outstanding balance owed.

This option accurately captures the essence of a short sale, distinguishing it from other types of real estate transactions. A sale involving multiple buyers does not pertain to the concept of a short sale, and while an auction sale might involve quick transactions, it does not specifically address the financial condition of the seller. Similarly, although a quick sale at a significantly reduced price can sometimes happen in various real estate scenarios, it does not necessarily indicate that the sale is a short sale unless it relates to the mortgage being greater than the sale proceeds.