What is a short sale in real estate?

A short sale in real estate specifically refers to a transaction where the proceeds from selling a property fall short of the balance owed on the mortgage. This situation commonly arises when homeowners are under financial distress and are unable to keep up with their mortgage payments, leading them to negotiate with lenders to accept a lesser amount than what is owed to release the lien on the property.

In a short sale, the lender must agree to this arrangement, and they often consider it a viable alternative to foreclosure, which is more costly and time-consuming for all parties involved. Proper negotiation and documentation are crucial in a short sale scenario to ensure that all stakeholders understand the potential losses and the decision to proceed with the sale.

Other choices do not accurately represent the concept of a short sale. A sale conducted at a reduced price does not necessarily imply that the mortgage amount is greater than the sale price, and it could be an ordinary transaction without the complexities of being "short." Regarding the option indicating that the proceeds equal the mortgage amount, that describes a standard sale, not a short sale. Lastly, a quick sale is unrelated to the financial obligations tied to the mortgage and does not define the essence of a short sale.