What is the definition of a "short sale"?

The definition of a "short sale" refers specifically to a transaction where the proceeds from the sale of a property are less than the outstanding balance owed on the mortgage. In this situation, the lender agrees to accept less than the full amount owed in order to facilitate the sale, likely because the homeowner is facing financial difficulties and cannot continue making mortgage payments.

This type of sale allows the homeowner to avoid foreclosure and can be beneficial for both the seller and the lender, as it typically allows the property to sell faster than going through the lengthy foreclosure process. The lender must approve the short sale, and the terms of the sale will often be negotiated to ensure all parties involved can reach a satisfactory conclusion.

Understanding this context is essential for anyone involved in real estate, as short sales present specific challenges and considerations compared to traditional sales or foreclosures.