What is a "short sale" in real estate?

A "short sale" in real estate refers specifically to a sale of a property where the proceeds from the sale are less than the amount owed on the mortgage. This situation typically arises when a homeowner is experiencing financial difficulties and is unable to continue making their mortgage payments. In a short sale, the lender agrees to accept a reduced payoff amount, which helps the homeowner avoid foreclosure. The process requires the lender's approval, as they will need to agree to accept less than the total amount owed on the loan.

This context is crucial because it highlights the need for a lender's consent in these scenarios, differentiating short sales from regular sales where the seller gains a profit above what they owe. Such nuances reinforce why understanding the mechanics of short sales is vital for real estate professionals and buyers. The other options presented do not capture this specific financial relationship between the sale price and the outstanding mortgage balance, which is fundamental to defining a short sale accurately.