What characterizes a short sale in real estate?

A short sale in real estate is characterized by a situation where the proceeds from the sale of a property are less than the outstanding balance owed on the mortgage. In this scenario, the lender agrees to accept a reduced amount, allowing the property owner to sell the home for less than what they owe. This typically occurs when a homeowner is facing financial difficulties and is unable to continue making mortgage payments, yet wants to avoid foreclosure.

It's essential for borrowers considering a short sale to obtain approval from their lender, as the lender will need to agree to the lower sale price in order for the transaction to proceed. This differentiates short sales from typical real estate sales, where the seller generally earns a profit or at least breaks even on the sale. The process also usually involves inspections and other standard practices in real estate transactions, contrary to the implication that inspections are not part of a short sale.