What defines a "short sale"?

A "short sale" is specifically defined as a sale where the proceeds from the sale of the property are insufficient to pay off the existing mortgage balance. In this situation, the lender agrees to accept a lesser amount than what is owed on the mortgage, allowing the homeowner to sell the property and avoid foreclosure.

This process typically involves negotiations with the lender to approve the sale at the reduced price. It can be beneficial for both the seller, who avoids the negative consequences of foreclosure, and for the lender, who may recover some of the outstanding loan amount rather than risking the full loss that comes with foreclosure.

Understanding the mechanics of a short sale is crucial for anyone involved in real estate transactions, especially in situations where homeowners may be struggling to meet their mortgage obligations.