What is a short sale in real estate?

A short sale in real estate refers to a situation where the seller owes more on their mortgage than the property's current market value, and the lender agrees to accept a lower amount to allow the sale to proceed. This typically happens when the homeowner is unable to keep up with mortgage payments and is seeking an alternative to foreclosure.

In this scenario, the lender evaluates the situation and, recognizing that selling the property for less than the owed amount is preferable to going through the lengthy and costly foreclosure process, grants approval for the short sale. This can help alleviate financial strain on the homeowner while allowing the lender to recover some of their investment.

The other options do not accurately depict a short sale. For instance, a sale where no mortgage is involved does not align with the definition of a short sale, nor does a sale mandated by the court, which typically refers to a foreclosure proceeding rather than a voluntary sale. Additionally, the presence of a buyer with excellent credit is unrelated to the concept of a short sale; creditworthiness does not influence the underlying dynamics of the sale or the agreement with the lender.