What is a short sale in real estate?

A short sale in real estate specifically refers to a transaction in which the proceeds from the sale of the property are less than the amount owed on the mortgage. In this situation, the lender agrees to accept a reduced payoff to allow the property to be sold, typically because the homeowner is unable to keep up with mortgage payments and is facing financial hardship. The lender must approve the sale, as they will be absorbing the loss from the remaining balance that the seller cannot cover. This process often involves a lengthy negotiation and can provide a beneficial resolution for the seller, who avoids foreclosure, while allowing the lender to recoup some of their investment.

The other options do not accurately depict a short sale. A scenario where proceeds exceed the mortgage balance indicates a traditional sale, and selling at a discounted price due to market conditions is more closely associated with an assessment of current market values rather than the specifics of mortgage debt. Lastly, requiring the owner to stay in the property for a specified time does not relate to the concept of a short sale, as it focuses on the sale process rather than the seller's occupancy after the sale.