What does "short sale" mean in real estate?

What does "short sale" mean in real estate?

• A. A sale where the home sells for a profit
• B. A sale where the property is sold for less than the amount owed on the mortgage, with lender approval required
• C. A sale completed without a mortgage
• D. A sale that occurs under foreclosure

Answer: (B)

A "short sale" in real estate specifically refers to a situation where a property is sold for less than the amount owed on its mortgage. This process requires the approval of the lender, as the lender must agree to accept a reduced payoff on the loan. The circumstances that typically lead to a short sale include financial hardship on the part of the homeowner, which prevents them from continuing with mortgage payments and leads them to sell the property at a loss. In contrast to other options, the first option describes a profitable sale, which does not align with the definition of a short sale. The third option concerns a sale performed without involving a mortgage at all, which is not relevant to what makes a short sale unique. The fourth option pertains to foreclosure, a separate process in which a lender takes possession of a property after a borrower fails to pay, rather than an agreement reached with the lender as seen in a short sale. Hence, the emphasis on lender approval and selling for less than the owed amount solidifies the distinction of option B as correct.

A "short sale" in real estate specifically refers to a situation where a property is sold for less than the amount owed on its mortgage. This process requires the approval of the lender, as the lender must agree to accept a reduced payoff on the loan. The circumstances that typically lead to a short sale include financial hardship on the part of the homeowner, which prevents them from continuing with mortgage payments and leads them to sell the property at a loss.

In contrast to other options, the first option describes a profitable sale, which does not align with the definition of a short sale. The third option concerns a sale performed without involving a mortgage at all, which is not relevant to what makes a short sale unique. The fourth option pertains to foreclosure, a separate process in which a lender takes possession of a property after a borrower fails to pay, rather than an agreement reached with the lender as seen in a short sale. Hence, the emphasis on lender approval and selling for less than the owed amount solidifies the distinction of option B as correct.