What is a short sale?

A short sale refers to a situation in real estate where a property is sold for less than the outstanding balance on the mortgage. This typically occurs when a homeowner is in financial distress and cannot afford to keep the home, and the lender agrees to allow the sale at a reduced price. In such scenarios, the bank or lender agrees to accept less than what is owed in order to facilitate a sale and minimize losses.

This process is significant because it allows the seller to avoid foreclosure, while the buyer may benefit from acquiring a property at a lower price. The official documentation of the short sale involves negotiation with the lender, making it a more complex transaction than a typical sale.

Understanding this concept is important for anyone involved in real estate transactions, especially those dealing with distressed properties, as it affects both the pricing strategy and the approach to selling a property.