How is a short sale defined in real estate terms?

A short sale in real estate is defined as a sale of property in which the proceeds are less than the amount owed on the mortgage. This situation typically arises when a homeowner is facing financial difficulties and cannot continue making mortgage payments. In a short sale, the lender agrees to accept a reduced amount to release the lien on the property because the homeowner is unable to repay the full loan amount.

This process allows the homeowner to avoid foreclosure, and it can benefit the lender as well, as selling the property at a short sale can result in a higher net recovery than if the property were foreclosed upon. The circumstances surrounding a short sale are often complex, as they require negotiations with the lender and the buyer, but it ultimately provides an option for distressed sellers to offload their property while mitigating losses for all parties involved.

In contrast, the other choices describe different scenarios that do not align with the definition of a short sale. For example, a sale after foreclosure refers to properties that have already gone through the legal process of foreclosure, while providing a warranty pertains to the condition and assurances about the property’s status and quality, which is unrelated to the concept of short sales. Lastly, a sale that requires immediate cash payment does not reflect a typical process in