What is a short sale in real estate?

A short sale in real estate occurs when a property is sold for less than the outstanding balance owed on the mortgage. This situation typically arises when the homeowner is facing financial difficulties and is unable to continue making mortgage payments. In a short sale, the lender must approve the transaction, as they will be accepting a loss on the loan. The benefits of a short sale can include a more favorable credit impact for the borrower compared to a foreclosure and the ability for the homeowner to avoid the lengthy foreclosure process.

The other options do not accurately describe a short sale. A quick sale at market price does not imply any specific financial distress or loan balance situation. An auction for distressed properties generally refers to properties that are being sold to recover debts, which can occur in foreclosure but is not the same as a short sale. Similarly, a sale involving significant seller concessions might indicate negotiations or adjustments but does not define the condition of selling for less than the mortgage balance.