What is a short sale in real estate?

A short sale in real estate occurs when a property is sold for less than the owed mortgage balance. This typically happens when the homeowner is unable to continue making mortgage payments, and the lender allows the property to be sold at a lower price to avoid the lengthy and costly foreclosure process. In a short sale, the lender needs to approve the sale since they will receive less than what is owed on the mortgage, and they often agree to this arrangement as it can be less financially burdensome than pursuing foreclosure.

The other options describe different real estate scenarios that do not align with the specific definition of a short sale.