What is a "short sale" in real estate?

A "short sale" refers to a specific type of transaction in real estate where the property is sold for less than the outstanding amount on the mortgage. This scenario typically arises when the homeowner is facing financial hardship and cannot continue to make mortgage payments. In a short sale, the lender agrees to accept less than what is owed to facilitate the sale of the property and prevent foreclosure. The process often requires the homeowner to demonstrate their financial situation to the lender, who must approve the sale terms, including the lower sale price.

This understanding highlights how the dynamics of a short sale differ significantly from other types of property transactions. For instance, selling the property at full price or completing a sale in under 30 days does not pertain to the definition of a short sale. Likewise, a sale of a property that is under renovation is unrelated to the financial aspect that characterizes short sales. Thus, recognizing the financial implications in short sales is crucial for both buyers and sellers navigating this challenging market scenario.